US Treasury Secretary Janet Yellen warned on Monday that Congress’ failure to raise the federal debt ceiling would deal a heavy blow to the US economy and weaken the dollar as the world’s reserve currency. debt of $31.4 trillion was reached on January 19.
When asked if the US Treasury could prioritize payments to bondholders in the event of default, Yellen, in an interview with CNBC, said President Biden would be forced to decide what to do with the resources of the US Treasury, but declined to discuss or rank the options.
“There are many different options, but there are no good options. Every one of those options is a bad option,” Yellen said. “The only option that really leaves our economy and our financial system in good shape is to raise the debt ceiling.
Yellen also noted that President Biden hopes to establish a process for discussion and compromise on fiscal policy with Republicans in Congress, but will not do so “with a gun to his head.”
The Treasury Secretary acknowledged that there was a “very large gap” between Biden’s position and that of many Republicans, and warned that their proposed spending cuts were “draconian”.
Biden insists Congress has a constitutional obligation to raise the national debt ceiling, which reflects federal money previously spent, with no strings attached. Some Republicans in the House of Representatives attribute any increase in the national debt ceiling to deep budget cuts, which Democrats oppose.
Biden is scheduled to meet at the White House on Tuesday with Republican President Kevin McCarthy, Senate Minority Leader Mitch McConnell and key congressional Democrats to try to break the impasse over raising the national debt ceiling.
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