Ahead of a highly anticipated meeting between President Joe Biden and Congressional leaders on Tuesday, senior Treasury officials reiterated dire warnings of economic “chaos” and “catastrophe” if the US doesn’t raise the debt ceiling as the country barrels toward default in early June.
“I know he wants to set up a process in which spending priorities and levels are discussed and negotiated but these negotiations should not take place with a gun, really, to the head of the American people,” US Treasury Secretary Janet Yellen said Sunday on ‘ABC This Week.’
While congressional Republicans want to tie any debt ceiling hike to spending and budget cuts, the administration has said the two issues are separate.
Yellen and her No. 2, Deputy Treasury Secretary Wally Adeyemo, both painted a stark picture of “economic chaos” if the debt ceiling isn’t lifted and confirmed that the latest Treasury data still indicates the US could default as soon as June 1st.
“If we were to default on our debt it would have a terrible impact on interest rates, and interest rates are the key thing to everybody to buy a home, to buy a car, for companies to invest,” Adeyemo said Sunday on MSNBC, warning that the current climate of uncertainty is already having an impact on the economy as businesses plan for potential catastrophe instead of future investments.
“We’re already going to start seeing the impacts on the economy of the fact that Congress hasn’t taken this off the table,” Adeyemo said.
White House economists and independent analysts have warned that the current brinksmanship and a potential future default could have a ruinous impact on the US economy, plunging the stock market and wiping out millions of jobs.
“If they fail to do it, we will have an economic and financial catastrophe that will be of our own making and there is no action that President Biden and the US treasury can take to prevent that catastrophe,” Yellen said, adding when pressed by ABC that there are “no good options” to take if Congress doesn’t act.
Her comments come as some have speculated about the possibility of President Biden invoking the 14th Amendment, or taking other extreme action, if the debt ceiling is not raised in time. “I haven’t gotten there yet,” Biden said in an interview Friday night when asked about such a move.
While a theoretical workaround, experts have also said the President unilaterally issuing debt without a ceiling increase would prompt a constitutional crisis and create severe uncertainty leading to an economic and financial crisis regardless. Previous administrations have deemed such a move as unworkable.
“There is no way to protect our financial system and our economy other than Congress doing its job and raising the debt ceiling,” Yellen said.
Adeyemo also tamped down the feasibility of using the 14th Amendment when asked about it Sunday, saying the “the only way” to “guarantee” that the US can pay its bills is to raise the debt ceiling.
Washington on the clock
Biden, whose White House has said that it will accept only a clean proposal to raise the debt limit, is set to sit down with House Speaker Kevin McCarthy, a California Republican, and other congressional leaders on Tuesday to discuss the debt ceiling.
House Financial Services Chairman Patrick McHenry expressed “modest pessimism” Sunday at the prospect of a debt deal coming together.
The North Carolina Republican suggested on CBS’ “Face the Nation” that the ultimate compromise to raise the debt limit would look “a lot like the bill we passed out of the House,” adding that “at this stage of the game, the one key ingredient I don’t have is what the administration would come to terms with.”
That bill, which would raise the nation’s $31. 4 trillion borrowing limit by an additional $1.5 trillion and slash federal spending, is unlikely to be taken up by the Democratic-led Senate. But the measure is primarily aimed at boosting Republicans’ efforts to negotiate with Democrats.
House Democratic leader Hakeem Jeffries of New York called the GOP proposal a “ransom note” on Sunday, labeling it the “Default on America Act.”
“Either Republicans want us to accept these dramatic cuts or accept a catastrophic default on our nation’s debt. That is what is the unreasonable position and hopefully in a few days Republicans will come to their senses and do what’s right by the American people,” Jeffries said on NBC’s “Meet the Press.”
Arizona independent Sen. Kyrsten Sinema, meanwhile, said Republicans and the White House must explore options for raising the debt ceiling because neither position has the votes to pass.
“The reality is the bill that Kevin (McCarthy) and his colleagues passed through the House is not going to be the solution. The votes do not exist in the United States Senate to pass that. But what the president is offering is not a realistic solution either. There’s not going to be just a simple clean debt limit. The votes don’t exist for that,” Sinema told CBS on Sunday.
She said the two sides need to negotiate a solution that will “protect the full faith and credit of the United States of America.”
This story has been updated with additional information.
CNN’s Andrew Millman and Aileen Graef contributed to this report.
