President Biden’s Administration Facing Probable Financial And Economic Chaos

US Treasury Secretary Predicts Financial ‘Chaos’ If Congress Does Not Intervene

Treasury Secretary Janet Yellen on Sunday 7th May 2023, Treasury Secretary Janet Yellen warned that the treasury department could run out of measures to pay its debt obligations by June. Secretary Yellen said that failure by Congress to raise the debt ceiling will cause what she called a “steep economic downturn” in the United States.

Talking to ABC’s ‘This Week’, Yellen said, “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 proceeded to advise that Congress should take action to avoid a probable “economic calamity.” According to her, the situation is at a critical point because the United States has currently been using “extraordinary measures” to avoid defaulting on the loans.

She insisted that this is not something that the Treasury Department can afford to continue doing. In her words, “It’s widely agreed that financial and economic chaos will ensue,” if the situation persists as it is.

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In a letter to House Speaker Kevin McCarthy, Yellen said that the data received by the Treasury Department forced them to reevaluate and move up the estimated dates when the department would be “unable to continue to satisfy all of the government’s obligations.”

The new date as per the new estimates shows possible defaulting could occur as soon as June 1st. As CNBC reveals, this date is earlier than Wall Street economists had forecasted.

What Is The Biden Administration Doing To Remedy The Situation?

Lawmakers have been making active arrangements to find a path forward to raise the debt ceiling as per Yellen’s suggestion or suspend it. Suspending the debt ceiling means removing the limit set on the amount of debt the federal government is authorized to accrue.

However, there is currently an impasse on the issue as members of Congress are divided with Republicans opposed to raising or suspending the debt ceiling.

On Monday, 8th May, President Joe Biden sent out an invite to the “big four” congressional leaders for a meeting at the White House to discuss a way forward for the debt limit. The “big four” includes, Senate Majority Leader Chuck Schumer, Senate Minority Leader Mitch McConnell, McCarthy, and House Democratic Leader Hakeem Jeffries.

Speaking to NBC, Hakeem Jeffries (New York), said that the meeting will facilitate the administration to find a way forward. He said, “We have to avoid default, period.”

However, Senator James Lankford (Oklahoma) is one of the many who are critical of how the Biden administration has chosen to go about the issue. According to him, the meeting should have been held sooner.

“Everyone knew this was coming and the president refused to be able to negotiate about it,” he told ABC.

The current US debt, which President Biden and his administration are currently pushing to be raised currently stands at $31.4 trillion (£25.12 trillion). Since 1960, there have been 78 increases, extensions, or revisions to the debt ceiling, frequently after tense talks which have for the most times gone to the wire.

As much as any apparent raising or suspension has been done at the last minute, the US government has never defaulted on its loans. If this were to be the first time, this development would as the BBC put it, “upend global financial markets and have far-reaching economic impacts.”

However, waiting and making any possible changes also has negative effects which Ellen reminded everyone in the letter.

In the letter she wrote, “We have learned from past debt limit impasses that waiting until the last minute to suspend or increase the debt limit can cause serious harm to business and consumer confidence, raise short-term borrowing costs for taxpayers, and negatively impact the credit rating of the United States.”