Without an agreement to increase the borrowing limit, the federal government could run out of funds by early June, jeopardizing wage payments, welfare programs, and other essential expenditures.

Yellen emphasized that it is Congress's responsibility to address this issue, and a failure to act could lead to a self-inflicted economic and financial catastrophe.

In an interview with ABC News, she stressed that debt ceiling negotiations should not involve putting pressure on the American people. However, time is running out for an agreement to be reached.

President Biden plans to meet with Republican leaders on Tuesday to request their support in raising the current limit of $31.4 trillion. Typically, Congress attaches conditions regarding budget and spending measures to the approval of a higher debt ceiling. While the House of Representatives recently passed a bill to raise the ceiling, it included significant spending cuts over the next decade. President Biden, on the other hand, wants a clean increase without any conditions, indicating that he will not negotiate until the debt ceiling is resolved. Yellen expressed concern that the lack of cross-party agreement could lead to a constitutional crisis.

The Biden administration is exploring the constitutional possibilities for the president to continue issuing new debt without congressional approval, but it aims to avoid such a scenario. Yellen emphasized the importance of finding a resolution without resorting to that measure, as it would create a constitutional crisis. Throughout history, the debt ceiling has been raised, extended, or revised 78 times since 1960, often with negotiations reaching the brink before a compromise is reached. The US has never defaulted on its payments, as the threat of default has always pushed for a resolution. Defaulting would have severe consequences, disrupting global financial markets and causing far-reaching economic impacts.

Yellen also highlighted the negative consequences of delaying a resolution, stating in a letter to Congress that waiting until the last minute to suspend or increase the debt limit can harm business and consumer confidence, increase short-term borrowing costs for taxpayers, and negatively impact the credit rating of the United States. (ILKHA)