US Treasury Secretary Janet Yellen has warned that if Congress does not act soon to raise the nation’s debt ceiling, there could be “financial and economic chaos.” Republicans have been asking President Joe Biden to negotiate a deal for spending cuts in exchange for lifting the national borrowing limit, but Yellen believes it is up to Congress to act. Yellen previously warned that the United States could run out of money to pay its financial obligations as early as June 1st. The ceiling on US public debt is legally fixed and can only be raised by congressional legislation signed into law by the president.
The Republican-led House of Representatives voted to lift the borrowing limit in late April but only with drastic cuts to rein in what that party sees as excessive spending. The bill has no chance of being adopted in the Senate, with its Democratic majority. Biden has refused to negotiate, noting that the debt ceiling has routinely been raised scores of times over the years, including under former Republican President Donald Trump.
Yellen believes negotiations should not take place with a gun pointed at the head of the American people and sidestepped questions about the possibility of Biden using a novel interpretation of the US Constitution to keep paying the nation’s bills. If Congress does not act, there could be the country’s first-ever default, with profound implications for the US and global economies. A default could cause the loss of eight million jobs and send GDP plunging by six percent. Since hitting its borrowing limit in January, the Treasury has taken extraordinary measures to continue financing the government’s activities, but those measures will soon be exhausted.
