Yellen: ‘No good options’ if Congress fails to act on debt

Treasury Secretary Janet Yellen said Sunday that the US has “no good options” to prevent an economic “calamity” if Congress fails to raise the $31.381 trillion borrowing limit in the coming weeks. She did not rule out President Joe Biden circumventing Congress to avoid a first-ever federal default.

Her remarks intensified Biden’s Tuesday meeting with legislative leaders from both parties.

Democrats and Republicans disagree on whether to negotiate the debt limit. GOP members, led by California House Speaker Kevin McCarthy, want spending cutbacks in exchange for lifting the borrowing ceiling, but Biden says the fear of default shouldn’t be used in budget talks.

On ABC’s “This Week,” Yellen warned of catastrophic consequences if the borrowing ceiling is not raised before the Treasury Department exhausts its “extraordinary measures” to function under the present constraint. She predicted early June, possibly June 1.

“Whether it’s defaulting on debt interest payments or Social Security or Medicare payments, we would simply not have enough cash to meet all our obligations,” she warned. “Financial and economic chaos would ensue.” Increased debt limits do not authorize new federal spending. Only Congress-approved spending could be borrowed.

Biden and McCarthy will have their first serious discussion in months at the White House with House Minority Leader Hakeem Jeffries, D-N.Y., Senate Majority Leader Chuck Schumer, D-N.Y., and Senate Minority Leader Mitch McConnell, R-Ky.

On April 26, House Republicans approved a debt ceiling increase with deep budget cutbacks. However, Biden has stated he will only negotiate federal spending if Congress eliminates the prospect of default.

Kyrsten Sinema, an independent who left the Democratic Party in December, advised Biden and McCarthy to compromise.

“The votes don’t exist for a simple clean debt limit,” she told CBS’s “Face the Nation.” “So the sooner these two guys get in the room and listen to what the other needs, the more likely they are to solve this challenge and protect the full faith and credit of the United States.”

Yellen was asked on ABC if Biden could circumvent Congress by claiming the 14th Amendment’s “validity” of U.S. debt “shall not be questioned.” Yellen didn’t answer, but indicated it wasn’t a solution.

We shouldn’t have to question the president’s ability to issue debt. She called this a constitutional crisis.

What if Congress doesn’t perform? “There are no good options,” she added.

Sen. James Lankford, R-Okla., concurred about the hazards of invoking the 14th Amendment, He told ABC that the Constitution “very clear that spending — all those details around spending and money actually has to come through Congress.”

He attacked Biden for not negotiating spending cutbacks, saying the debt limit exists to compel a broader discussion on government outlays. “It’s not just debt that’s incurred,” the senator stated. It also raises the limit of what we can add to this.

Biden’s refusal to negotiate with Republicans on extending the debt limit is based on Obama administration lawyers’ 2011 14th Amendment study. At the time, Justice Department lawyers believed the president could not unilaterally issue fresh debt.

“I’ve not gotten there yet,” Biden said MSNBC on Friday about the 14th Amendment suggestion.

The House Intelligence Committee’s chairman, Ohio Republican Rep. Mike Turner, and its top Democrat, Connecticut Rep. Jim Himes, warned CNN’s “State of the Union” that the debt ceiling issue threatened national security.

Himes predicted the Russians and Chinese would exploit it. The U.S. has never defaulted. So we can’t picture that.”

Turner claimed Biden would shoulder the blame. “If the president fails to negotiate with Congress and continues out-of-control spending that threatens our economy, that is a national security threat,” he warned.