Treasury Secretary Janet Yellen Warns of “Calamity” if US Fails to Raise Debt Ceiling

Treasury Secretary Janet Yellen warned Sunday that the United States could face an economic “calamity” if Congress fails to raise the nation’s borrowing limit of $31.381 trillion in the coming weeks. Yellen did not rule out President Joe Biden bypassing lawmakers and acting on his own to try to avert a first-ever federal default.

House Speaker Kevin McCarthy of California is leading GOP lawmakers in demanding spending cuts in return for raising the borrowing limit, while Biden has said the threat of default shouldn’t be used as leverage. Yellen’s comments add even more urgency to a high-stakes meeting Tuesday between Biden and congressional leaders from both parties.

Yellen said that if the debt ceiling is not raised, the government would be unable to pay its bills and the consequences would be “catastrophic.” She noted that the government would have to choose between paying Social Security benefits, military salaries, or interest on the debt.

The Treasury Department has already taken extraordinary measures to avoid defaulting on the debt, but Yellen said those measures will not be enough to avoid a default if the debt ceiling is not raised. She also warned that a default could cause a “severe” economic downturn, with a “ripple effect” that would be felt around the world.

The meeting between Biden and congressional leaders is seen as a critical step in averting a default. It is unclear if the two sides will be able to reach an agreement, but Yellen’s comments have added to the urgency of the situation. The outcome of the meeting could have far-reaching implications for the US economy and the global financial system.