Janet Yellen, U.S. Treasury Secretary, speaks at the Independent Community Bankers Of America (ICBA) Capital Summit in Washington, U.S., Tuesday, May 16, 2023.
Nathan Howard | Bloomberg | Getty Images
Treasury Secretary Janet Yellen said on Sunday that “difficult selections” would have to be made about which bills would go unpaid if the debt ceiling was not raised.
Yellen confirmed her warning that the US may default on its debt as early as June 1, which she said could cause widespread “economic chaos.” She said there would be no good results if Congress did not act.
“We’re focused on raising the debt ceiling, and if that does not occur, there will be tough selections,” she told NBC’s Meet the Press. “There can be no acceptable outcomes if the debt ceiling is not raised, whatever decisions we make.”
The removal of the debt ceiling is essential for the government to cover expenses already approved by Congress and the president to prevent default. Raising the debt ceiling does not authorize recent spending, but House Republicans have said they will not lift the cap unless Biden and lawmakers agree to future spending cuts.
Because of this, deliberations in the Capitol were tense.
President Joe Biden said Sunday that Republicans “must come out of their extreme stance” during a press conference ahead of his departure from the Group of Seven summit in Japan. After negotiations stalled on Saturday, Biden said he plans to call House Speaker Kevin McCarthy from California on his way back to Washington.
“It is time for Republicans to accept that there is no bilateral deal that may only be made on their particular terms,” Biden said.
McCarthy told reporters on Sunday after arriving at the Capitol that he planned to speak with Biden “inside the next hour,” adding that he was glad the president was returning to the U.S.
“I believe he needs to move away from the socialist wing of the Democratic Party and represent America. And meaning either side have to compromise,” McCarthy said. “I used to be there all the time.
At the Independent Community Bankers of America Capital Summit, Yellen said the White House Council of Economic Advisers said a default could lead on to an economic downturn as severe as the Great Recession, when 8 million Americans will lose their jobs and the value of the stock market will fall. by about 45%.
She also drew attention to a Moody’s Analytics report that showed similar figures that greater than 7 million Americans are out of labor and $10 trillion in household wealth has evaporated. Yellen also warned that a breach of the debt ceiling could affect essential government services.
Biden said on Sunday he believed a deal could be reached with the Republicans, however it wasn’t certain.
“I can not guarantee they would not force insolvency by doing something outrageous,” he said.