Yellen: U.S. faces ‘widespread suffering’ if debt limit not raised

Yellen has told lawmakers that the U.S. could run out of cash to cover its obligations as soon as June 1.

“A default could cause widespread suffering as Americans lose the income that they need to get by,” she told the Independent Community Bankers of America conference in Washington. “And the resulting income shock could lead to a recession that destroys many American jobs and businesses.”

Yellen’s remarks were an escalation of her warnings about the consequences of the U.S. failing to raise the debt limit. She ratcheted up her rhetoric as congressional leaders and President Joe Biden struggle to reach a compromise on a path forward.

In the event of a protracted U.S. default, Yellen said a simulation by the White House Council of Economic Advisers found that more than 8 million Americans would lose their jobs and the value of the stock market would be slashed by about 45 percent.

“If that sounds catastrophic — that’s because it is,” she said.