US Treasury Secretary Janet Yellen has warned of a “constitutional crisis” that risks economic and financial catastrophe if Congress does not raise the federal debt limit, with the government at risk of running out of cash in the absence of new capacity to debt.
The White House and Republican lawmakers are deadlocked over raising the debt ceiling, which Yellen said could be breached as early as June 1. His comments came two days before US President Joe Biden met with congressional leaders in new talks on the tax standoff.
“Self Congress he can’t live up to his responsibilities, there are simply no good options,” he said in an interview with ABC This week Sunday.
Biden administration officials have considered invoking the 14th Amendment to the US Constitution to continue issuing new debt to pay Social Security recipients, bondholders, government employees and others without legislative approval.
A clause of the amendment states that “the validity of the public debt of the United States, authorized by law, including debts incurred for the payment of pensions and rewards for services in suppressing insurrection or rebellion, shall not be discussion”. Economists and constitutional experts are divided on whether evading Congress in this way is legal.
The United States “should not get to the point where we have to consider whether the president can continue to issue debt. This would be a constitutional crisis,” Yellen said.
When asked if Biden would invoke the 14th amendment, Yellen he said he did not want to consider emergency options yet, but using the clause would be “among the not good options”. Raising the debt ceiling was the job of Congress, he added.
“If they don’t, we will have an economic and financial catastrophe that will be of our own accord, and there is no action that President Biden and [the] The US Treasury can take steps to prevent that catastrophe.”
House Republicans late last month passed a bill that would raise the $31.4 trillion debt limit by $1.5 trillion and delay the risk of default until next year. The legislation, which contained a long list of Republican spending cuts and policy priorities like canceling student loan debt, is doomed to fail in the Democrat-controlled US Senate, but is seen as a starting point for talks between parts.
“There are no red lines,” Patrick McHenry, the Republican chairman of the House Financial Services Committee, told CBS Take on the nation when asked about upcoming discussions with Biden. “Everything is on the table at this point. The key thing that needs to be in this equation is addressing our fiscal house, short-term and long-term.
Biden, who was asked if he would invoke the 14th amendment, said in an interview broadcast Friday that he “wasn’t there yet.” He will host congressional leaders from both parties in the White House on Tuesday and said he was ready to “negotiate in detail” on a separate Republican budget proposal. But he has asked Republicans to raise the debt ceiling unconditionally.
Even if the United States avoided default, approaching the deadline without a resolution meant it was “likely to have financial market consequences,” Yellen warned.
Speaking on MSNBC Sunday, Deputy Treasury Secretary Wally Adeyemo said a US default would significantly affect the government’s borrowing capacity.
“If we were to default on our debt, it would have a terrible impact on interest rates,” he said.
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