Janet Yellen, US Treasury secretary, speaks during the Independent Community Bankers Of America (ICBA) Capital Summit in Washington, DC, US, on Tuesday, May 16, 2023.
Nathan Howard | Bloomberg | Getty Images
Treasury Secretary Janet Yellen said Sunday that “hard choices” will need to be made about which bills will go unpaid if the debt ceiling is not raised.
Yellen reaffirmed her warning that the United States could default on its debt as early as June 1, which she has said could cause widespread “economic chaos.” There will be no good outcomes if Congress fails to take action, she said.
“We’re focused on raising the debt ceiling, and there will be hard choices if that doesn’t occur,” she told NBC’s “Meet the Press.” “There can be no acceptable outcomes if the debt ceiling isn’t raised, regardless of what decisions we make.”
Lifting the debt ceiling is necessary for the government to cover spending commitments already approved by Congress and the president in order to prevent default. Raising the debt ceiling does not authorize new spending, but House Republicans have said they will not lift the limit if Biden and lawmakers do not agree to future spending cuts.
As a result, the on-again, off-again deliberations on Capitol Hill have been tense.
President Joe Biden said Sunday that Republicans “need to move from their extreme position” during a press conference ahead of his departure from the Group of Seven Summit in Japan. After negotiations stalled late Saturday, Biden said he planned to call House Speaker Kevin McCarthy, R-Calif., on his way back to Washington.
“It’s time for Republicans to accept that there is no bipartisan deal to be made solely, solely, on their partisan terms,” Biden said.
McCarthy told reporters on Sunday after arriving at the Capitol that he planned to speak to Biden “in the next hour,” adding that he is glad the president is returning to the U.S.
“I think he’s got to get away from the socialist wing of the Democratic party and represent America. And that means both sides have to have compromise,” McCarthy said. “I’ve been there the entire time.”
At the Independent Community Bankers of America Capital Summit Tuesday, Yellen said the White House Council of Economic Advisers found that a default could lead to an economic downturn as bad as the Great Recession, with 8 million Americans losing their jobs and the stock market’s value falling by about 45%.
She also noted a Moody’s Analytics report which found similar numbers with more than 7 million Americans out of work and $10 trillion in household wealth evaporated. Yellen also warned that a debt ceiling breach could affect essential government services.
Biden said Sunday he thinks an agreement can be reached with Republicans, but that it is not certain.
“I can’t guarantee that they wouldn’t force a default by doing something outrageous,” he said.