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22 May, 2023 12:10

US will default if debt deal fails – treasury secretary

The current borrowing limit is a constraint on Washington’s ability to meet its obligations, Janet Yellen insists
US will default if debt deal fails – treasury secretary

America’s chances of paying its bills after June 1 are “quite low,” US Treasury Secretary Janet Yellen warned on Sunday in an interview with NBC’s ‘Meet the Press’.

According to Yellen, if Congress fails to reach an agreement on raising the country’s $31.4 trillion borrowing limit by that time, it will be forced to default on “some bills” shortly after.

There’s always uncertainty about tax receipts and spending. And so it’s hard to be absolutely certain about this, but my assessment is that the odds of reaching June 15, while being able to pay all of our bills, is quite low… My assumption is that if the debt ceiling isn’t raised, there will be hard choices to make about what bills go unpaid,” Yellen said.

The treasury secretary did not say which ‘bills’ she had in mind, but noted that the government’s most immediate obligations range from paying interest on outstanding debt to “obligations to seniors who count on social security, military, contractors who’ve provided services to the government.

She added that “there can be no acceptable outcomes if the debt ceiling isn’t raised.

The administration of US President Joe Biden and Republicans led by House Speaker Kevin McCarthy have been at an impasse over raising the debt ceiling for several months, despite warnings that the US could face its first-ever default unless it is raised by June 1.

Republicans are refusing to agree to the move unless Biden agrees to government spending cuts and curbs on social programs.

Some lawmakers have called on Biden to invoke his powers under the 14th Amendment to the Constitution and bypass Congress and unilaterally raise the debt ceiling. However, Biden told reporters on Sunday that while he has considered doing so, there is likely not enough time before the deadline.

Biden and McCarthy are scheduled to meet again on Monday to discuss the matter.

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