Treasury Secretary Janet Yellen said Monday that there is a “big gap” between the positions of US President Joe Biden and Republican leaders when it comes to a decision on raising the debt limit.
Her comments in an interview on CNBC come a day before Biden is due to meet Republican House Speaker Kevin McCarthy and Senate Republican leader Mitch McConnell at the White House, alongside top Democrats in Congress.
While Republicans seek to lift the $31.4 trillion borrowing limit only in combination with drastic spending cuts, Biden has refused to agree to such reductions — raising fears of the first national debt default.
“Clearly, there’s a very big gap between where the President is and where the Republicans are,” said Yellen on Monday.
While she acknowledged the need for discussions and compromise over fiscal policy and spending, she added that Biden is not willing to do this with “a gun to the head of the American people and the American economy.”
“It’s really essential that Congress raise the debt ceiling so that we’re not in the position of defaulting on our bills,” Yellen said, adding that this could produce “financial chaos.”
Asked about who gets prioritized if the government runs out of money to pay all its obligations, Yellen said: “There are no good options. Every option is a bad option.”
She also weighed in on banking system stress, saying the system remains well-capitalized despite turmoil in the sector in the wake of four regional lenders’ recent collapse.
“Regulators stand ready to use the same tools we have in the past, if there are further pressures that arise, that could create contagion,” she said.
She also maintained that there remains a path to bring down inflation while still having a strong labor market.
