Yellen Delivers Horrifying Warning…

Janet Yellen says we might default on our obligations as soon as June 1. The Treasury Secretary sent out a letter to Congress as the parties fight over raising that debt ceiling. In January the statutory limit of $31.4 trillion was reached and suggested that her agency temporarily take appropriate measures should the government not be able to pay its bills. Without a deal the economy would be crippled.

Yellen encourages the GOP

To behave in a certain way. The Republicans narrowly passed a bill called the “Limit, Save, Grow Act of 2023”.  This will suspend the debt ceiling either through March 31, 2024 or if the debt increases by $1.5 trillion, whichever comes first, in exchange for spending cuts.

The Congressional Budget Office thought the proposal would cut deficits by $4.8 trillion over a decade. But Biden and the Democrats don’t want to rein in spending or make any policy changes.

Yellen released her letter

House Speaker Kevin McCarthy wants to negotiate. Chuck Schumer wants a hearing on this bill to “expose the true impact of this reckless legislation on everyday Americans.”

Biden called Congressional leaders, including Schumer and McCarthy, to meet. Yellen warned that she couldn’t predict when the mess would implode. She said it’s “impossible to predict with certainty the exact date when Treasury will be unable to pay the government’s bills, and I will continue to update Congress in the coming weeks as more information becomes available.”

Yellen instructing her agency

She’s suspending issuing new state and local government series Treasury securities. This shouldn’t wait til the last minute so no deals in the dead of night.

“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. If Congress fails to increase the debt limit, it would cause severe hardship to American families, harm our global leadership position, and raise questions about our ability to defend our national security interests. I respectfully urge Congress to protect the full faith and credit of the United States by acting as soon as possible.”

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