Treasury Secretary Janet Yellen has highlighted a "big gap" in positions between US President Joe Biden and Republican leaders regarding raising the debt limit. Republican leaders are calling for spending cuts to be combined with the lifting of the $31.4 trillion borrowing limit, but Biden is unwilling to make such cuts. With the risk of national debt default looming, the issue will be discussed when Biden meets with Republican House Speaker Kevin McCarthy and Senate Republican leader Mitch McConnell. Yellen stressed the importance of raising the debt ceiling to avoid defaulting on bills and potential "financial chaos". However, she acknowledged that there are no good options if the government runs out of money.
Yellen also addressed the banking system stress, noting that despite recent collapses of four regional lenders, the system remains well-capitalized. She assured that regulators are ready to use the same tools as before if further pressures arise. Additionally, she maintained that there is still a path to bring down inflation while maintaining a strong labor market.
Republicans insist on spending cuts as a precondition to raising the debt limit. Biden, however, has refused to combine the two. This disagreement between the two sides has created a "big gap" in positions regarding the debt limit. The topic is set to be discussed in a meeting between President Biden and Republican leaders, along with top Democrats in Congress.
Yellen emphasized the importance of raising the debt ceiling to avoid defaulting on bills, which could lead to "financial chaos". She also admitted that there are no good options if the government runs out of money to pay its obligations. Despite recent turmoil in the banking sector, Yellen stated that the system is well-capitalized and regulators stand ready to use the same tools as before. Finally, she expressed her confidence that it is still possible to bring down inflation while maintaining a strong labor market.
