US facing 'constitutional crisis' over national debt emergency - 'No good options'
The US could face a 'constitutional crisis' if Congress fails to act on the debt ceiling
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The US could face a "constitutional crisis" if Congress fails to act on the debt ceiling, according to Treasury Secretary Janet Yellen.
Yellen sounded the alarm over possible financial market consequences and claims that without an agreement to increase what the federal government can borrow, it could run out of money by early June.
Should this happen, the federal government might not be able to make wage, welfare and other payments.
"It's Congress's job to do this. If they fail to do it, we will have an economic and financial catastrophe that will be of our own making," she said.
Biden has asked Congress to raise the debt ceiling with no conditions
Reuters
During an interview with ABC News on Sunday, Yellen said the negotiations on the issue should not take place "with a gun to the head of the American people".
Biden has asked Congress to raise the debt ceiling with no conditions.
Last month, the House of Representatives passed a bill to raise the government's $31.4 trillion debt ceiling but included in the bill sweeping spending cuts over the next decade - which Biden and his fellow Democrats oppose.
The President will meet with Republican House Speaker Kevin McCarthy, Republican Senate Minority Leader Mitch McConnell and top congressional Democrats on Tuesday at the White House to discuss the issue.
"We should not get to the point where we need to consider whether the president can go on issuing debt. This would be a constitutional crisis," Yellen said.
“What to do if Congress fails to meet its responsibility? There are simply no good options,” she added.
Biden has said he will not negotiate over the debt ceiling increase, but would discuss budget cuts after a new limit is passed.
Washington sets a limit on federal borrowing and currently the ceiling is equal to roughly 120 per cent of the country's annual economic output.
Without an agreement to increase what the federal government can borrow, it could run out of money by early June
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The debt reached that ceiling in January and the Treasury Department has kept obligations just within the limit, but by July or August, Washington could have to stop borrowing altogether.
Under that scenario, shockwaves could shake through global financial markets as investors question the value of US bonds.
"We have to make sure that America pays its bills to avoid a dangerous default on our debt in a manner that will blow up the United States economy," Top House Democrat Hakeem Jeffries, told the NBC program Meet the Press.