'This Week' Transcript 5-7-23: Treasury Secretary Janet Yellen and Sen. James Lankford

Interview

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Thanks.

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Yes, early June is when we project that we will run out of cash. And there is a chance it could be as early as June 1st. Of course, there is a lot of uncertainty and I plan to update Congress as new information becomes available. But that's still our current thinking.

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Well, really that's it. We have been using extraordinary measures for several months now. And our ability to do that is running out. And we will start to run down our cash and our current projection is that in early June a day will come when we're unable to pay our bills unless Congress raises the debt ceiling. And it's something I strongly urge Congress to do.

Of course, it's appropriate to have negotiations about the budget, about spending priorities. President Biden has presented a detailed budget that does cut deficits by $3 trillion over 10 years while investing in the strength of the American economy. But we do need to raise the debt ceiling to avoid economic calamity.

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Well, Treasury finds itself in the position where we're unable to pay all of the bills that come due that day. And this would be really the first time in the history of America that we would fail to make payments that are due. And, you know, whether it's defaulting on interest payments that are due on the debt or payments due for Social Security recipients or to Medicare providers, 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.

U.S. Treasury securities are the safest bedrock security underlying the global financial system. A failure of the United States to honor all of its debt would call into question our credit worthiness. Even as we get very close to this date, if Congress doesn't act, we're likely to see financial market consequences.

In 2011 there was a steep decline in the stock market and our borrowing costs back in 2011, the U.S. was downgraded by the credit rating agencies. There would permanently higher borrowing costs for Americans for buying a home, buying a car and a failure to raise the debt ceiling would cause a steep economic downturn.

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Well, look, I don't want to get ahead of the negotiations that will occur.

President Biden has invited -- invited the leadership of Congress to the White House. So, on Tuesday, I know he wants to set up a process in which spending priorities and levels are discussed in the negotiated.

But these negotiations should not take place with a gun really to the head of the American people because --

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Well, it's important for Congress to meet a responsibility. 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.

But, of course, in negotiation, that spending levels and priorities should take place and the president is more than prepared to engage in that negotiation.

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Look, you know, our priority is to make sure that Congress does its job. There is no way to protect our financial system and our economy other than Congress doing its job and raising the debt ceiling and enabling us to pay our bills. And we should not get to the point where we need to consider whether the president can go on issuing debt. This would be a constitutional crisis.

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Look, all I want to say is that it's Congress's job to do this. If they fail to do it, we will have an economic and financial catastrophe that will be of our own making and there is no action that President Biden and the U.S. Treasury can take to prevent that catastrophe.

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Look, I don't -- I don't want to consider emergency options. What's important is the members of Congress recognize what their responsibility is and avert what will surely be regardless of how it's handled, what option is used to handle it, an economic and financial catastrophe.

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Well, what to do if Congress fails to meet its responsibility? There are simply no good options and the ones that you've listed are among the not good options.

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I do believe that. I believe our banking system has strong capital levels and access to liquidity. We have taken decisive action to make sure the difficulties at a few banks don't create contagion that undermines the confidence of depositors in the safety of their deposits and the banking system. And the tools we used previously, we would be prepared to use again if necessary.

But while bank stocks, some bank stocks are under downward pressure, earnings have been under pressure, the banks have access to liquidity and are well-capitalized, and I have confidence in the overall strength of the banking system.

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Thank you.

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