Yellen warns of calamity over debt limit

WASHINGTON — Treasury Secretary Janet Yellen said Sunday that there are “no good options” for the United States to avoid an economic “calamity” if Congress fails to raise the nation’s borrowing limit of $31.381 trillion in the coming weeks. She did not rule out President Biden bypassing lawmakers and acting on his own to try to avert a first-ever federal default.

Her comments added even more urgency to a high-stakes meeting Tuesday between Biden and congressional leaders from both parties.

Democrats and Republicans are at loggerheads over whether the debt limit should even be the subject of negotiation. GOP lawmakers, led by House Speaker Kevin McCarthy, are demanding spending cuts in return for raising the borrowing limit, while Biden has said the threat of default shouldn't be used as leverage in budget talks.

Yellen, interviewed on ABC's “This Week," painted a dire picture of what might happen if the borrowing limit is not increased before the Treasury Department runs out of what it calls “extraordinary measures” to operate under the current cap. That time, she said, is expected to come in early June, perhaps as soon as June 1.

“Whether it’s defaulting on interest payments that are due on the debt or payments due for Social Security recipients or to Medicare providers, we would simply not have enough cash to meet all of our obligations,” she said. “And it’s widely agreed that financial and economic chaos would ensue."

An increase in the debt limit would not authorize new federal spending. It would only allow borrowing to pay for what Congress has already approved.

Biden's White House meeting with McCarthy, House minority leader Hakeem Jeffries, Senate majority leader Chuck Schumer, and Senate minority leader Mitch McConnell will be the first substantive talks between Biden and McCarthy in months.