US Treasury Secretary, Janet Yellen, has warned of financial and economic chaos if Congress does not act soon to raise the nation's debt ceiling. Yellen has been urging lawmakers to take action to lift the debt limit before the country runs out of money to pay its financial obligations, which could happen as early as June 1st. Failure to raise the debt ceiling could lead to a default on US debt, with profound implications for the global economy.
Republicans have been pushing for spending cuts in exchange for lifting the borrowing limit, but Yellen insists that it is the responsibility of US lawmakers to raise the ceiling. The current impasse has raised the possibility of the country's first-ever default, causing analysts to warn that markets would be shaken, and interest rates would rise lastingly.
The ceiling on US public debt is legally fixed and can only be raised by congressional legislation signed into law by the president. The Republican-led House of Representatives voted in late April to lift the borrowing limit, but only with drastic cuts to spending. The bill is unlikely to be adopted in the Senate, with its Democratic majority.
Biden has so far refused to negotiate, noting that the debt ceiling has routinely been raised scores of times over the years, including under former Republican President Donald Trump. Republicans insist that Biden's refusal to talk is the principal obstacle.
Biden is set to meet with leaders of both parties in Congress to discuss the issue. Yellen suggests setting up a process to discuss spending priorities and levels, but these negotiations should not take place with a "gun pointed at the head of the American people."
Yellen sidestepped questions about the possibility of Biden using a novel interpretation of the US Constitution to keep paying the nation's bills, saying that "there are simply no good options" in the absence of congressional action.
The impasse has raised concerns about the possibility of an economic calamity for American households and the global financial system. Experts warn that failure to raise the debt ceiling could lead to the loss of eight million jobs and send GDP plunging by six percent.
