Yellen cautions CEOs on recession risk from debt ceiling battle.

Treasury Secretary Janet Yellen Warns of Financial Risk Amid Debt Ceiling Controversy

Treasury Secretary Janet Yellen has been reaching out to prominent American business leaders to discuss the financial risk stemming from the current debt ceiling controversy. The debt ceiling, established by Congress to prevent the federal government from spending beyond a predetermined national debt limit of $31.4 trillion, was surpassed earlier this year. Yellen has warned that the nation could face a default as soon as the first day of June unless the debt limit is suspended or increased.

The Danger of Brinkmanship

Yellen has held multiple one-on-one conversations with individual executives about the “dangerous consequences of the current brinkmanship” in recent days. Biden administration officials have repeatedly asserted that Republican lawmakers are risking a worldwide recession by insisting that any amendment to the debt ceiling should be accompanied by meaningful spending cuts or limits upon future expenditures. Yellen said in an interview on Sunday that Republicans are thereby holding a “gun to the head of the American people,” contending that the effort to achieve “agreement on budget priorities” before increasing the debt limit “simply is unacceptable” due to the recession risks.

Separate Negotiations Processes

White House Press Secretary Karine Jean-Pierre said in a Monday briefing that Biden would attempt to create separate negotiations processes for budget cuts and the debt ceiling. “Remember, that’s regular order,” she told reporters. “That is the way that we’re supposed to be doing this: having a negotiation on budget, not connecting it to the debt ceiling.”

The House Freedom Caucus Proposal

Members of the House Freedom Caucus, a bloc of conservative Republicans, have said they would consider voting to raise the debt ceiling in exchange for a framework that returns expenditures to fiscal year 2022 levels, raises the debt ceiling only for the next year, and limits annual spending growth to 1% over the next decade. McCarthy unveiled a budget proposal that mirrored the framework and passed the measure through the House two weeks ago. The narrowly Republican majority requires votes from the House Freedom Caucus to pass bills.

The Path to Avoid Default

Jean-Pierre said last week that “the only practical path to avoid default is for Congress to suspend the debt limit without conditions” because of the “limited time” before the potential default. House Freedom Caucus Chairman Scott Perry (R-PA) previously told The Daily Wire that the remarks were “like a pyromaniac starting a fire and watching it burn for months suddenly declaring it needs to be put out while simultaneously pouring more gas on it.”

Forty-three Republican members of the Senate recently endorsed a letter declaring that they would oppose a “clean” debt ceiling bill separate from any spending cuts or other policy concessions. Meanwhile, Senate Majority Leader Chuck Schumer (D-NY) announced that the upper chamber would hold hearings on the bill to “expose the true impact of this reckless legislation on everyday Americans.”

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