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'Severe hardship to American families' is inching closer and closer as Congress fails to find a debt ceiling solution, Janet Yellen warns

Biden and Janet Yellen
U.S. Treasury Secretary Janet Yellen.Chip Somodevilla/Getty Images
  • Janet Yellen reminded Kevin McCarthy on Tuesday that the US could default on its debt in early June.

  • If the debt ceiling is not raised by then, Americans could experience "severe hardship," Yellen warned.

  • Biden is set to meet with McCarthy again on Tuesday to discuss a potential agreement.

Treasury Secretary Janet Yellen is once again warning that the country is teetering on the brink of economic catastrophe.

In a new letter to House Speaker Kevin McCarthy, Yellen reiterated that the country might run out of money to pay its debts as soon as June 1 if Congress doesn't step in. And, right now, with Democrats and Republicans still squabbling over how to approach a debt ceiling increase, Congress is running out of time to avert a crisis.

"If Congress fails to increase the debt limit, it would cause severe hardship to American families, harm our global leadership position, and raise questions about our ability to defend our national security interests," Yellen wrote.

For months, President Joe Biden and lawmakers on both sides of the aisle have been sounding the alarm on the importance of raising the debt ceiling before the US hurdles into an unprecedented and catastrophic default on its debt. Last week, Biden finally met with McCarthy and top congressional lawmakers to discuss a potential deal to raise the debt ceiling, and on Sunday, the president offered optimism toward the direction of those talks.

"It never is good to characterize a negotiation in the middle of a negotiation," Biden told reporters on Sunday. "I remain optimistic because I'm a congenital optimist. But I really think there's a desire on their part, as well as ours, to reach an agreement, and I think we'll be able to do it."

But hours before Yellen reiterated her warning to McCarthy, the speaker was nowhere close to confident with the way the negotiations have been progressing.

"It doesn't seem to me yet they want a deal, it just seems like they want to look like they are in a meeting but they aren't talking anything serious," McCarthy said.

"I think we've got to have a deal done by this weekend to have a timeline to be able to pass it in both houses," he added.

Biden is expected to meet with McCarthy and other top lawmakers on Tuesday to once again attempt to come to an agreement on raising the debt ceiling, but at this point, both sides appear to remain split on a solution to the crisis.

And while there may be areas both parties could compromise on, like rescinding unspent pandemic funds and strengthening energy permitting, Republicans are still standing behind their red lines. The Washington Post reported on Monday, for example, that GOP staff refused the White House's request to close tax loopholes in debt ceiling talks.

The fate of the economy remains in Congress' hands, and it remains to be seen whether lawmakers can reach an agreement in time to prevent Americans from experience the first default in this country's history.

Read the original article on Business Insider