House Republicans and President Joe Biden remain stalled in contentious budget talks with each side accusing the other of setting the country on a course for economic disaster. The House GOP has presented a budget and avowed that they will only vote to raise the debt ceiling in exchange for spending cuts, while Biden has thus far been unwavering in his rejection of their offer and unwillingness to negotiate.
If they don’t come to an agreement soon, the country is at risk of default as it literally runs out of money to fund operations.
Treasury Secretary Janet Yellen appeared on “This Week” with George Stephanopolous on Sunday and sounded the alarm on the financial catastrophe that would occur if the nation defaulted. Asked how soon that could happen, she said as soon as next month:
Yes, early June is when we project that we will run out of cash. And there is a chance it could be as early as June 1st.
Of course, there is a lot of uncertainty and I plan to update Congress as new information becomes available. But that’s still our current thinking.
Stephanopolous asked if there were any extraordinary measures she could take.
We have been using extraordinary measures for several months now. And our ability to do that is running out. And we will start to run down our cash and our current projection is that in early June a day will come when we’re unable to pay our bills unless Congress raises the debt ceiling. And it’s something I strongly urge Congress to do.
Of course, it’s appropriate to have negotiations about the budget, about spending priorities. President Biden has presented a detailed budget that does cut deficits by $3 trillion over 10 years while investing in the strength of the American economy. But we do need to raise the debt ceiling to avoid economic calamity.
The U.S. has never defaulted before, and many people wonder what the exact consequences of that would be. Yellen:
Well, Treasury finds itself in the position where we’re unable to pay all of the bills that come due that day. And this would be really the first time in the history of America that we would fail to make payments that are due. And, you know, whether it’s defaulting on interest payments that are due on the debt or payments due for Social Security recipients or to Medicare providers, we would simply not have enough cash to meet all of our obligations. And it’s widely agreed that financial and economic chaos would ensue…
In 2011 there was a steep decline in the stock market and our borrowing costs back in 2011, the U.S. was downgraded by the credit rating agencies. There would permanently higher borrowing costs for Americans for buying a home, buying a car and a failure to raise the debt ceiling would cause a steep economic downturn.
It’s pretty nightmarish stuff. We’ve faced budget showdowns before, but this one seems ominous because Biden has been on a spending crusade since he took office, and thus far seems unwilling to even have a talk about lowering spending. Yellen alleged, “These negotiations should not take place with a gun really to the head of the American people,” but the question is, who’s holding that metaphorical gun?
So far, it’s the GOP who looks more reasonable on this issue, and Biden comes off as stubborn and inflexible. He’s going to have to budge unless his goal is to drive our economy off a cliff (even more than he’s done already).
McConnell Makes It Clear–No Debt Ceiling Deal in Senate ‘Without Substantive Spending’ Cuts
Joe Biden Confirms He’s Going to Destroy the Economy Over the Debt Ceiling
Ted Cruz Blasts Biden on Debt Ceiling Negotiations, ‘Playing Roulette’ With the Economy
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