Treasury Secretary Janet Yellen stated that if the federal government does not agree to raise the debt limit in the near future, there could be “economic chaos.” The statement increases pressure on the White House to reach an agreement with congressional leaders during negotiations in the coming week.
President Joe Biden is set to meet with House Speaker Kevin McCarthy (R-CA) and other congressional leaders this week to discuss raising the nation’s ability to continue borrowing.
Yellen’s comments are starker than those she made earlier in May. Yellen said earlier that the United States could default on its debt as early as June if the debt ceiling is not raised.
However, in an interview with ABC News Sunday, Yellen said that a lack of agreement would lead to an “economic calamity.”
“It’s widely agreed that financial and economic chaos will ensue,” Yellen said.
Last month, the Republican-led House of Representatives passed a bill to increase the debt ceiling. The bill, backed by McCarthy, agreed to a number of long-term budget cuts to reduce the budget.
The Republicans agreed to a deal that would cancel more than $90 billion in COVID funding, as well as $80 billion in new outlays for the IRS.
Rep. Thomas Massie (R-KY) asked how long “we can go on spending beyond our means before it all crashes, or before we get into hyperinflation?”
The Kentucky Republican said that it would be “irresponsible” to raise the debt limit without significant “fiscal responsibility or accountability.”
43 Senate Republicans have signed a letter refusing to advance any bill that raises the debt ceiling without substantive spending and budget reforms.
— Mike Lee (@SenMikeLee) May 7, 2023
McCarthy and House Republicans will likely receive aid from the Senate. Sen. Bill Hagerty (R-TN) said that Republicans in the chamber would force a compromise in order to pass an increase in the debt ceiling.
The president has been criticized for his changing positions regarding the debt ceiling. Biden had earlier stated that he would not negotiate with congressional Republicans over the topic. He then scheduled a summit with congressional leaders.
However, Biden’s recent statements leave the potential solution to the debt issue unresolved. Both Washington and Wall Street will keep a close eye on the negotiations and their outcome.