Janet Yellen isn't 'credible' and the US won't default on its debt on June 1, Republican congressman says

janet yellen
Janet Yellen, vice chair of the Board of Governors of the U.S. Federal Reserve SystemREUTERS/ Robert Galbraith
  • Congress can't raise the debt ceiling and avoid economic crisis because Republicans want spending cuts.

  • Janey Yellen said Treasury may not be able to delay a default past June 1.

  • Republican Rep. Byron Donalds said she is not 'credible.'

Just days before the date the Treasury Secretary said the US could default on its debt, one Republican Congressman questioned her judgment.

"I don't think June 1 is the date," Republican Rep. Byron Donalds of Florida said Thursday. "We could actually find a way to get past that."

Janet Yellen, who runs the Department of the Treasury, said the federal government may no longer be able to pay its debts and default as soon as June 1, triggering an economic crisis that could put 2.6 million Americans out of a job, tank the typical American's retirement savings by $20,000, and hike payments on everything from student loans to mortgages.

To avoid a default, Congress has to raise the debt ceiling, and Republicans won't do it unless Democrats agree to spending cuts.

In April, the GOP-controlled House narrowly passed a bill that would raise the debt ceiling by $1.5 trillion while cutting spending by $4.5 trillion through measures like tighter work requirements to qualify for food assistance and other social welfare, a ban on Biden's broad student loan-forgiveness programs, and taking back unspent pandemic funding sent to state governments.

President Joe Biden has vowed to veto it and has not yet reached a deal with Speaker Kevin McCarthy over cuts that would satisfy Republicans.

On Wednesday, House Democrats called out Republicans for what they called "reckless hostage taking" of the US economy.

Faced with a congressional stalemate, some Republicans have questioned the Treasury Secretary's predictions.

On Thursday, Donalds called Yellen's credibility into question along with her "X-date," when the Treasury can no longer move around debt payments to avoid a default.

"Nobody even knows if Janet Yellen's data is right," Donalds said.

"Janet Yellen was wrong on inflation. Janet Yellen's been wrong on GDP growth. Janet Yellen was wrong on having interest rates too low for far too long. So she's not being credible," he continued.

In June 2022, Yellen said she "was wrong" to dismiss pandemic-era inflation as a small and manageable risk. Though the Federal Reserve's rate hikes have helped bring down inflation to 4.9%, that's well above the central bank's 2% goal, meaning Americans are paying substantially more for everything from gas to groceries.

Other Republicans have expressed doubts about the X-date.

"We'd like to see more transparency on how they come to that date," House Majority Leader Rep. Steve Scalise said at a press conference Tuesday, adding Yellen "implied that it's June 1, or later, giving some openness to the idea that June 1 may not be the so-called X-date."

"I think she should come in here and tell us exactly how she arrived at June 1," Donalds, who sits on the House Financial Services Committee, said.

"I think she's coming to the Financial Services on June 7th," he said, during which "I'm gonna be asking her about it, about her calculations on X-date because she is the one that's signaling to the Treasury markets and—and to the bond market—what the debt ceiling date actually is. Nobody else has that authority except her."

In a May 1 letter to Speaker Kevin McCarthy, Yellen said she arrived at June 1 as the X-date based on tax receipt inflows.

"Our best estimate is that we will be unable to continue to satisfy all of the government's obligations by early June, and potentially as early as June 1," she said.

Because of the difficulty predicting tax receipts and government outlays, she added, "the actual date that Treasury exhausts extraordinary measures could be a number of weeks later than these estimates," referring to various accounting moves the department has taken to keep paying the bills since the country technically hit the $31 trillion debt ceiling in January.

Without providing details, Donalds said the US could find ways to delay a default, which would buy Congress more time to negotiate about spending cuts and get Republicans to raise the debt ceiling.

"If you get to June 15, now you're talking about tax receipts come in. Now you're talking about July. There's a lot of stuff there," he said.

Asked about his alternative date, Donalds said, "Listen, I'm not the Treasury Secretary. Members are going through a lot of different data tables, so we're all over the place."

Read the original article on Business Insider