WASHINGTON — Failure to raise the U.S. debt ceiling would cause an “economic catastrophe,” Treasury Secretary Janet Yellen said Monday.
“That is something that could produce financial chaos, it would drastically reduce the amount of spending and would mean that Social Security recipients and veterans and people counting on money from the government that they’re owed, contractors, we just would not have enough money to pay the bills,” Yellen told CNBC’s “Closing Bell: Overtime.”
Yellen’s comments came as a political stalemate over raising the debt limit was forcing the Treasury Department dangerously close to a worst-case scenario: a potential U.S. debt default. This would occur if Treasury were to exhaust the extraordinary measures it implemented earlier this year to meet its obligations after the U.S. reached its statutory debt limit of $31.4 trillion.
In order to avoid a default on the nation’s debt, Congress must vote to either raise or suspend the debt limit before Treasury runs out of emergency funding. But with only eight days left this month during which both the House and the Senate are scheduled to be in session at the same time, time is running out to reach a deal.
“There’s a very big gap between where the president is and where the Republicans are” on raising the debt ceiling, Yellen said.
U.S. Treasury Secretary Janet Yellen takes questions on the Biden administration’s plans following the collapse of three U.S. lenders including Silicon Valley Bank and Signature Bank, as she testifies before a Senate Finance Committee hearing on U.S. President Joe Biden’s proposed budget request for fiscal year 2024, on Capitol Hill in Washington, March 16, 2023.
Mary F. Calvert | Reuters
Treasury and the Congressional Budget Office both released new reports last week predicting that extraordinary measures could be exhausted as early as June 1, which was sooner than Wall Street or the White House had been expecting. The new, earlier date was the result of…
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