Treasury Secretary Janet Yellen said on Monday that a failure by Congress to raise the $31.4 trillion federal debt limit would cause a huge hit to the U.S. economy and weaken the dollar as the world's reserve currency.
Asked whether the U.S. Treasury could prioritize payouts to bondholders in the event of a default, Yellen told CNBC that President Joe Biden would be forced to make decisions on what to do with Treasury's resources if the debt ceiling was not raised, but declined to discuss or rank the options.
She said Biden hoped to establish a process for discussing and compromising on fiscal-policy issues and his budget proposal with congressional Republicans but would not do it "with a gun" to his or the American people's heads. Yellen conceded there was "a very big gap" between Biden's position and that of many Republicans, warning that their proposed spending cuts were "draconian."
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