Treasury Department Issues Cryptic & Dire Warning

Treasury Secretary Janet Yellen has issued a stern warning to congressional leadership: without an agreement on the debt ceiling, the federal government may default on its obligations as soon as June 1.

In a letter to lawmakers, Yellen warned ofserious harm to business and consumer confidence, higher shortterm borrowing costs for taxpayers, and a negative impact on the credit rating of the United States should Congress fail to increase the debt limit.

If Congress fails to increase the debt limit, it would cause severe hardship to American families, harm our global leadership position, and raise questions about our ability to defend our national security interests, she wrote, adding that the exact date of the debt default isimpossible to predict.

The debt ceiling, which currently stands at $31.4 trillion, was surpassed earlier this year, and the Treasury Department expects to default on obligations as early as June 1 unless the debt limit is either suspended or increased.

House Speaker Kevin McCarthy (RCA), House Minority Leader Hakeem Jeffries (DNY), Senate Majority Leader Chuck Schumer (DNY), and Senate Minority Leader Mitch McConnell (RKY) have been in negotiations with President Joe Biden over possible mechanisms to amend the debt limit.

McCarthy has proposed a framework that would return expenditures to fiscal year 2022 levels, increase the debt limit only for the next year, and cap annual spending growth at 1% over the next decade. The House passed the proposal alongside a oneyear increase in the debt ceiling last month.

However, Biden and McCarthy are stillfar apart, according to the latter. The president and congressional leaders are scheduled to meet for a second time on Tuesday in an effort to reach an agreement.

A debt default would cause a recession, as the federal government, a major borrower of funds, is unable to repay its obligations. Moreover, the high national debt is a source of persistent financial risk and a damper on longterm economic growth.

Yellen has urged Congress toprotect the full faith and credit of the United States by acting as soon as possible. With the June 1 deadline quickly approaching, it remains to be seen whether an agreement can be reached in time to avert a debt default.


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