Treasury Secretary Janet Yellen said failure to avoid a looming federal government default would undermine Washington’s ability to provide international leadership and defend US national security.
Yellen has long warned a default could cause an “economic and financial catastrophe.” She added the new wrinkles Thursday while in Japan to attend a meeting of Group of Seven finance officials.
A default “would spark a global downturn” and “would also risk undermining US global economic leadership and raise questions about our ability to defend our national security interests,” Yellen said according to the text of her remarks released by the Treasury.
President Joe Biden and Republican lawmakers made little progress in a meeting earlier this week in Washington that kicked off negotiations on the topic. Republican aides and White House staff planned to begin budget discussions in its wake, with another meeting set for Friday between Biden and congressional leaders.
Biden and congressional Republicans are locked in a showdown over raising the $31.4 trillion borrowing limit, with GOP leaders demanding promises of future spending cuts before they approve a higher ceiling. Biden has insisted on a “clean” increase, with budget talks kept separate.
The US government reached the statutory cap on borrowing in January and the Treasury has since been using special accounting measures to make cash available. Yellen has told Congress those measures could run out as soon as June 1, putting payments to US bond investors, benefits recipients and federal contractors, among others, in jeopardy.