Yellen warns of ‘economic chaos’ unless Congress raises the debt ceiling

Treasury Secretary Janet Yellen on Sunday said that failure to raise the debt ceiling will cause a “steep economic downturn” in the U.S., and she reiterated her warning that the Treasury Department may run out of measures to pay its debt obligations by June.

“Our current projection is that in early June, a day will come when we’re unable to pay our bills unless Congress raises the debt ceiling, and it’s something I strongly urge Congress to do,” Yellen told ABC’s “This Week.”

Yellen said the U.S. has already been using “extraordinary measures” to avoid default, and it’s not something the Treasury Department can continue to do. She said Congress needs to take action to avoid “economic calamity.”

“It’s widely agreed that financial and economic chaos will ensue,” Yellen said.

Lawmakers have been trying to find a path forward to raise or suspend the debt ceiling, which would enable the U.S. to pay its bills on time. But they’re currently at an impasse, raising the prospect of default.

Yellen has called for decisive action, and quickly. In a letter to House Speaker Kevin McCarthy, R-Calif., Monday, Yellen said new data on tax receipts forced the department to move up its estimate of when the Treasury Department “will be unable to continue to satisfy all of the government’s obligations” to potentially as early as June 1. This date is earlier than Wall Street economists were expecting.

On Monday, President Joe Biden called the “big four” congressional leaders — Senate Majority Leader Chuck Schumer, D-N.Y., Senate Minority Leader Mitch McConnell, R-Ky., McCarthy and House Democratic Leader Hakeem Jeffries, N.Y. — to invite them to a May 9 meeting at the White House to discuss the debt limit, a White House official told NBC.

Jeffries said Sunday that the meeting Biden has organized is “very important” and will help the U.S. find a way forward.

“We have to avoid default, period,” he told NBC’s “Meet the Press.”

But for Sen. James Lankford, R-Okla., the meeting about the debt ceiling should have happened much sooner. He said the issue was raised the week after the election in November, and that President Biden’s refusal to negotiate has been “stunning.”

“Everyone knew this was coming and the president’s refused to be able to negotiate about it,” he told ABC’s “This Week” on Sunday.