Defaulting on US debt would cause 'calamity,' warns Treasury chief

ISTANBUL

The US Congress failing to raise the nation's debt limit, which could lead to defaulting on its debt, would cause "calamity" for the world's biggest economy, the Treasury secretary has warned.

If that happens, the Treasury would find itself in the position “where we’re unable to pay all of the bills that come due that day ... we would simply not have enough cash to meet all of our obligations. And it’s widely agreed that financial and economic chaos would ensue," Janet Yellen told the This Week program Sunday on American network ABC.

"And this would be really the first time in the history of America that we would fail to make payments that are due," she added.

The government could default on its debt as early as June 1, she reiterated.

President Joe Biden on Friday warned that failure to increase the debt limit in order to prevent a default would have "a catastrophic impact" on the US economy, adding that it should be raised without any conditions attached to it by the Republicans.

Yellen said Biden invited congressional leaders to come to the White House on Tuesday to discuss spending priorities, and added: "But these negotiations should not take place with a gun really to the head of the American people."

"Since 1960, the debt ceiling has been raised 78 times, three times during the prior administration, always with bipartisan support. And it simply is unacceptable for Congress to threaten economic calamity for American households in the global financial system as the cost of raising the debt ceiling and getting agreement on budget priorities," she explained.

The US hit its $31.4 trillion debt limit on Jan. 19. Since then, the Treasury Department has been taking "extraordinary measures" to avoid a default and ensure that the federal government would continue to pay its bills, but those measures are due to fall short in early June, according to Yellen.