01:35 - Source: CNN
U.S. debt default could have a big impact on the global economy
CNN  — 

Treasury Secretary Janet Yellen reaffirmed June 1 as the “hard deadline” for the US to raise the debt ceiling or risk defaulting on its obligations.

“I indicated in my last letter to Congress that we expect to be unable to pay all of our bills in early June and possibly as soon as June 1. And I will continue to update Congress, but I certainly haven’t changed my assessment. So I think that that’s a hard deadline,” Yellen said during an interview on NBC’s “Meet the Press.”

Yellen’s warning came hours after President Joe Biden delivered a grim assessment on the state of negotiations during his remaining hours in Japan. Biden issued a stark warning Sunday, ahead of his high-stakes phone call with House Speaker Kevin McCarthy, that congressional Republicans could use a national default to damage him politically and acknowledged time had run out to use potential unilateral actions to raise the federal borrowing limit, a sharp shift in tone days before the deadline to reach an agreement.

Reflecting that shift tone, the treasury secretary reiterated that there will be some bills that go unpaid, if the debt ceiling isn’t raised.

“There will be hard choices to make if the debt ceiling isn’t raised,” she said. “And you know, I would simply say since 1789, the United States has a history of paying its bills on time. That’s what the world wants to see a continued commitment to do that. It’s what underlies US Treasury securities as the safest investment on the planet. And it’s not an acceptable situation for us to be unable to pay our bills.”

Yellen downplayed the impact of tax receipts or spending delaying the X-date past early June, saying the odds are “quite low,” the US makes it to June 15 without defaulting if no congressional intervention happens.

On sticking points, Yellen pointed to Republican’s insistence on taking revenue off the negotiating table among other areas.

“Something that greatly concerns me is that they have even been in favor of removing funding that has been provided to the Internal Revenue Service to crack down on tax fraud,” she said.

Yellen agreed with the president’s assessment that invoking the 14th Amendment, “doesn’t seem like something could be appropriately used in these circumstances,” given the legal uncertainty and time frame. She downplayed the possibility of some extra unilateral action the president could take, and instead said hard choices will be made should a deal not get made and that some bill will go unpaid.

“My devout hope is that Congress will raise the debt ceiling,” she said. “There will be no acceptable outcomes if the debt ceiling isn’t raised, regardless of what decisions we make.”

However, Pennsylvania Republican Rep. Brian Fitzpatrick said there may be some leeway past the June 1 deadline.

“The June 1st date was probably, according to Secretary Yellen, the earliest possible date,” he told CBS News, adding that “we do have enough cash flow” to “pay the interest on our debt.”

“We’re going start to see the state tax revenues come in the second week of June, so I think we’re OK on that,” Fitzpatrick said.

Fitzpatrick appeared along with his Problem Solvers caucus co-chair Democratic Rep. Josh Gottheimer of New Jersey. Both Gottheimer and Fitzpatrick said they should still treat June 1 as the deadline even if there is some leeway.

“Regardless if we have a few more days, the bottom line is we can’t continue to play chicken with the full faith and credit of the United States of America. The risks are too significant, as we all know, both to paying our debts and what that would mean with our reputation in the world and obviously the government of China would love us to default,” Gottheimer said.