Senior Treasury officials reiterate dire warnings if debt ceiling not lifted, pour cold water on invocation of 14th amendment

CNN
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Ahead of a highly anticipated meeting between President Joe Biden and congressional leaders on Tuesday, senior Treasury officials reiterated dire warnings of economic chaos and catastrophe if the U.S. does not raise the debt ceiling while the country is heading for bankruptcy in early June.

I know he wants to create a process where spending priorities and levels are discussed and negotiated, but these negotiations should not be done with a gun, no way, to the head of the American people, US Treasury Secretary Janet Yellen said on ABC Sunday This Week.

While Republicans in Congress want to link any increase in the debt ceiling to spending and spending cuts, the administration has said the two issues are unrelated.

Yellen and her No. 2 Deputy Treasury Secretary Wally Adeyemo both painted a grim picture of economic chaos if the debt ceiling is not lifted and confirmed that the latest data from the Treasury Department still indicates that the US will enter into force on June 1. could be lacking.

If we defaulted on our debts, it would have a terrible impact on interest rates, and interest rates are the most important thing for everyone to buy a house, buy a car, for businesses to invest, Adeyemo said Sunday on MSNBC and warned that the current climate of uncertainty is already having an impact on the economy as companies plan for potential catastrophe rather than future investment.

“We were already going to see the economic impact of Congress not taking this off the table,” Adeyemo said.

White House economists and independent analysts have warned that the current crisis and a possible future default may carry risks devastating impact on the US economyplummet and wipe out the stock market millions of jobs.

If they fail, we will have an economic and financial catastrophe of our own making and there is no action that President Biden and the U.S. Treasury can take to prevent that catastrophe, Yellen said, adding when ABC insisted insisted there are no good options to take if Congress doesn’t act.

Her comments come as some have speculated about the possibility that President Biden will invoke the 14th Amendment, or take other extreme measures, if the debt ceiling is not raised in time. I’m not there yet, Biden said in an interview Friday night when asked about such a move.

Although it is a theoretical solution, experts have also said that the president’s unilateral debt issuance without raising the ceiling would create a constitutional crisis and create serious uncertainty, leading to an economic and financial crisis one way or another. Previous governments have seen such a move as unworkable.

There is no other way to protect our financial system and economy than for Congress to do its job and raise the debt ceiling, Yellen said.

Adeyemo also pressed the feasibility of using the 14th Amendment when asked about it on Sunday, saying the only way to guarantee the US can pay its bills is to raise the debt ceiling.

Biden, whose White House has said it will accept only a clean proposal to raise the debt limit, will sit down Tuesday with House Speaker Kevin McCarthy, a California Republican, and other congressional leaders to discuss the debt ceiling.

House Financial Services chairman Patrick McHenry expressed modest pessimism on Sunday about the prospect of a debt deal.

The North Carolina Republican suggested on CBS Face the Nation that the ultimate compromise to raise the debt limit would be much like the bill we passed from the House, adding that at this stage in the game the one key ingredient I don’t is what the board would deal with.

That bill, which would bring the nations $31. The 4 trillion borrowing cap with another $1.5 trillion and cutting federal spending is unlikely to be passed by the Democrat-led Senate. But the measure is primarily intended to boost Republican efforts to negotiate with Democrats.

New York House Democratic leader Hakeem Jeffries called the GOP proposal a ransom note on Sunday, calling it the Default on America Act.

Either the Republicans want us to accept these dramatic cuts, or we accept a catastrophic default on our nation’s debt. That’s the unreasonable position and hopefully within a few days the Republicans will come to their senses and do what’s right for the American people, Jeffries said on NBC’s Meet the Press.

Arizona Independent Senator Kyrsten Sinema, meanwhile, said Republicans and the White House should explore options to raise the debt ceiling because neither position has the votes to pass.

The reality is that the bill that Kevin (McCarthy) and his colleagues passed through the House will not be the solution. The votes do not exist in the United States Senate to approve that. But what the president is offering is also not a realistic solution. There will not just be a simple, clean debt limit. That’s not what the votes are for, Sinema told CBS on Sunday.

She said the two sides must negotiate a solution that will protect the full trust and honor of the United States of America.

This story has been updated with additional information.