Treasury Secretary Yellen Calls CEOs to Issue a Warning about the Debt Ceiling
The Treasury Secretary has warned that the government could run out of money, triggering an economic crisis that would destroy millions of jobs and roil the global economy. She is calling on business leaders to expand on her warning to Congress.
Janet Yellen, the Secretary of the US Treasury, has been engaging in discussions with CEOs and business leaders regarding the potential ramifications of brinkmanship surrounding the debt ceiling.
After Yellen's communication to Congress regarding the possibility of the United States defaulting on its obligations by June 1 unless the debt limit is addressed, numerous calls have been made. This expedited timeline has intensified the discussions between President Joe Biden and House Republican lawmakers, increasing pressure on them.
As per the Congressional Budget Office's forecast, there is a notable possibility of the Treasury running out of funds in early June due to lower-than-anticipated tax collections.
According to a recent report released by White House economists, a prolonged default would result in the loss of over 8 million jobs and a 50% reduction in the stock market's value. The report evaluated the potential consequences across three hypothetical situations: brinksmanship, a brief default, and a prolonged default.
According to a spokesperson from the White House, the extended default scenario involves three months of deadlock.
As per the analysis conducted by the Biden administration, even a brinksmanship scenario that manages to avoid default would result in the elimination of 200,000 jobs and a reduction of 0.3 percentage points in the annual gross domestic product.
According to the economists, in the event of a brief default, the economy would experience a loss of approximately 500,000 jobs and a 0.3 percentage point increase in the unemployment rate.
Reuters published the initial report on Yellen's outreach to corporate leaders.
According to Reuters, the individual postponed her trip to Japan to attend the G7 meeting this week and granted an interview with ABC News on Sunday. During the interview, she cautioned that a failure by Congress to increase the $31 trillion debt ceiling could result in a significant economic and financial crisis.
Congress must fulfill its responsibility by raising the debt ceiling to protect our financial system and economy, enabling us to meet our financial obligations. We must avoid reaching a juncture where the feasibility of the president's ability to continue issuing debt must be deliberated. Ms. Yellen stated on Sunday during an interview with ABC News that such an event would lead to a constitutional crisis.
On April 26, the House of Representatives, currently under Republican control, approved a bill introduced by House Speaker Kevin McCarthy. The proposed legislation entails raising the debt ceiling on the condition of implementing government spending reductions of approximately 8% by 2024, along with other stipulations. The Democratic party is advocating for a bill raising the debt ceiling without attached conditions.
President Biden has extended invitations to the congressional leaders, namely McCarthy, House Minority Leader Hakeem Jeffries, Senate Majority Leader Charles Schumer, and Senate Minority Leader Mitch McConnell, to attend a meeting on Tuesday. The purpose of the meeting is to collaborate and reach a consensus, as reported by Reuters.
On Wednesday, President Biden is scheduled to deliver a speech in Westchester County, N.Y., regarding the potential negative impact of proposed spending cuts approved by House Republicans. The speech will focus on the potential harm to teachers, older adults needing food aid, and veterans seeking healthcare.
This is a component of a larger initiative by President Biden to portray the reductions proposed by the Republican party as excessively harsh. According to aides, this message is perceived to enhance his negotiating position with the GOP and bolster his incipient 2024 reelection campaign. On Wednesday, he is scheduled to visit a congressional district that President Biden won in the 2020 election but is currently represented by Republican Congressman Mike Lawler.
President Biden has expressed his willingness to engage in discussions regarding reducing the federal deficit while simultaneously advocating for a "clean" increase to the debt limit. The proposed budget plan aims to reduce deficits by approximately $3 trillion within ten years. This will be achieved primarily through tax hikes on affluent individuals and implementing modifications such as enabling the government to negotiate prescription drug prices.
In contrast, the bill that the House approved with the support of Republican votes would result in deficit savings of $4.5 trillion through reductions in spending, the elimination of tax incentives for investments in clean energy, and the reversal of President Biden's initiatives to alleviate the weight of student loan debt.
Representative McCarthy, a member of the Republican Party from California, has made it clear that his speakership is contingent upon securing certain concessions from President Biden in exchange for raising the borrowing limit. Some members of his party have indicated that they will not vote in favor of a debt measure unless all of their proposals are included in the final legislation.