Treasury Secretary Janet Yellen on Monday reiterated her warning in a letter addressed to House Speaker Kevin McCarthy stating that if Congress fails to raise the debt limit, it would cause severe hardships to American families.
Yellen stated if the debt crisis isn’t resolved it would “harm our global leadership position and raise questions about our ability to defend our national security interests.”
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She also reiterated that the Treasury Department won’t be able to satisfy all the government’s obligations if Congress fails to find a resolution by early June and “potentially as early as June 1.”
Yellen’s letter comes just a day ahead of the crucial meeting between President Joe Biden and McCarthy where both leaders are widely anticipated to arrive at some solution. “I remain optimistic because I’m a congenital optimist,” Biden had said earlier adding that he believed there was a desire on both sides to reach an agreement. “I think we’ll be able to do it.”
Yellen also cited history to highlight how debt ceiling stand-offs could hurt the economy. “We have learned from past debt limit impasses that waiting until the last minute to suspend or increase the debt limit can cause serious harm to business and consumer confidence, raise short-term borrowing costs for taxpayers, and negatively impact the credit rating of the United States,” she said in the letter. Yellen also noted that Treasury’s borrowing costs have increased substantially for securities maturing in early June.
Bottlenecks: Meanwhile, fresh snags are reported to have developed after the White House presented congressional Republican leaders with a list of proposals to reduce the deficit by closing tax loopholes on Monday, which were universally rejected by the GOP.
The President is scheduled to leave on Wednesday on a trip to Japan for a meeting of G7 leaders. Biden said he still planned on making the trip.
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