U.S. Treasury Secretary Janet Yellen said on May 1, 2023 that the federal government could be unable to pay its bills as early as June 1.

U.S. Treasury Secretary Janet Yellen said on May 1, 2023 that the federal government could be unable to pay its bills as early as June 1.

(Photo: Day Donaldson/flickr/cc)

Yellen Gives Hard Deadline for GOP to End Economic Hostage Situation

"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."

After months of taking "extraordinary measures" to prevent a first-ever U.S. default, Treasury Secretary Janet Yellen on Monday warned that "our best estimate is that we will be unable to continue to satisfy all of the government's obligations by early June, and potentially as early as June 1, if Congress does not raise or suspend the debt limit before that time."

Amid calls for a clean bill to raise the nation's arbitrary borrowing limit to avert a default that economists say could be catastrophic for the U.S. and global economies, House Speaker Kevin McCarthy (R-Calif.) and 216 other Republicans last week passed what critics called a "debt ceiling scam" containing "extreme, harmful cuts against average Americans to protect billionaire tax breaks."

McCarthy went ahead with the vote despite Senate Majority Leader Chuck Schumer (D-N.Y.) warning that the House GOP's so-called Limit, Save, Grow Act is "dead on arrival" in the upper chamber, elevating concerns that congressional Republicans will continue risking a global economic crisis in hopes of forcing Democrats to agree to massive spending cuts.

"Given the current projections, it is imperative that Congress act as soon as possible to increase or suspend the debt limit in a way that provides longer-term certainty that the government will continue to make its payments," Yellen wrote to McCarthy on Monday, noting that "it is impossible to predict with certainty the exact date when Treasury will be unable to pay the government's bills."

"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," she added. "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."

As Yellen sent her notice to McCarthy, Schumer circulated a dear colleague letter declaring that with the vote last week on what Democrats have rebranded the Default on America (DOA) Act, "House Republicans sent a hard-right ransom note to the American people."

Pledging that "the Senate will show the public what this bill truly is" with "hearings to expose the true impact of this reckless legislation on everyday Americans," Schumer added:

Speaker McCarthy has surrendered to the far-right extremist members of his caucus and the DOA is their crown jewel. In backrooms, they pulled together a slew of unpatriotic and harmful policies that would take the country backwards. The DOA would cut critical funding to nearly all sectors of American life meaning fewer jobs, higher costs, and leaving policemen, first responders, border patrol, and our brave veterans all hanging out to dry. The DOA would repeal the historic green energy tax credits from the Inflation Reduction Act, threatening over $150 billion in investments and 18,000 jobs that have been announced since Democrats passed that bill. The DOA would hamper our international standing by gutting funding for critical State Department programs and cutting-edge research facilities and sending jobs overseas.

Let's be perfectly clear: The Republican Default on America Act does nothing to actually resolve the looming debt crisis, and it has no hope of ever becoming law. If anything, the MAGA House Republicans' actions have increased the likelihood of default. It locks the House into an unacceptable and extreme position that pulls us even further apart. If Speaker McCarthy was a serious good-faith negotiator, he would not have let extremists take him hostage and move this debate in the wrong direction.

After reiterating that "the real solution is bipartisan support for a clean bill to increase the debt limit," Schumer concluded that "a reckless Republican-forced default could plunge the country into a deep and painful recession and destabilize the global economy. We will do everything we can to protect the American people and prevent a default."

Meanwhile, President Joe Biden also called out GOP leadership on Monday, saying during a National Small Business Week event that "we pay our bills, and we should do so without reckless hostage-taking from some of the MAGA Republicans in Congress."

Citing two unnamed sources, Politico reported Monday evening that Biden has invited McCarthy, House Minority Leader Hakeem Jeffries (D-N.Y.), Schumer, and Senate Minority Leader Mitch McConnell (R-Ky.)—who has said the speaker and president need to reach an agreement—to "meet at the White House on May 9 to discuss the impending breach of the U.S. debt limit."

In a joint statement Monday, Schumer and Jeffries urged Republicans to "put aside partisan interests and do what is right and necessary for the American people," emphasizing that "we do not have the luxury of waiting until June 1 to come together, pass a clean bill to avoid a default, and prevent catastrophic consequences for our economy and millions of American families."

Earlier Monday, former Labor Secretary Robert Reich noted that Biden "rightfully says that raising the so-called debt ceiling should not be negotiable" and offered the president some advice: "Ignore McCarthy and the Republican radicals."

"Mr. President, your oath to uphold the Constitution takes precedence. As the supreme law of the land, the Constitution has greater weight than the debt ceiling," Reich wrote. "If House Republicans refuse to raise the debt ceiling, you are obligated by the U.S. Constitution and your oath of office to ignore the debt ceiling and continue to pay the debts of the United States."

"The Republicans want to lure you into a cynical game, Mr. President," he added. "The nation needs you to play hardball by ignoring them."

This post has been updated with a joint statement from Senate Majority Leader Chuck Schumer and House Minority Leader Hakeem Jeffries.

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