Debt ceiling talks to resume at White House as Yellen warns default could trigger recession

With time running out, President Joe Biden and congressional leaders are set to meet Tuesday afternoon to discuss the debt ceiling, while Treasury Secretary Janet Yellen stressed that a default could trigger a recession.

Biden, House Speaker Kevin McCarthy, House Minority Leader Hakeem Jeffries, Senate Majority Leader Chuck Schumer and Senate Minority Leader Mitch McConnell will meet at the White House at 3 p.m

“We don’t have that much time anymore. We want to make sure we avoid a default, but they have to get serious and they haven’t taken it seriously in any of these negotiations,” McCarthy told Rachel, ABC News Scott’s senior congressional correspondent on Tuesday.

Hours before the summit, Yellen said the economic shock that would result from an unprecedented default “could lead to a recession.”

“It is important that Congress act as soon as possible,” she said in her address in downtown Washington, explaining that “we are already seeing the effects of risky policies” and that “a default would lead to an economic catastrophe.” .

Yellen has repeatedly warned that the US could default in early June, possibly as early as June 1, although the exact date remains uncertain.

Yellen wrote in Monday a letter to McCarthy The Treasury Department was already seeing negative effects on the economy as negotiations dragged on – including increased borrowing costs – and it could do more damage if lawmakers waited until the last hour to reach an agreement.

Schumer also explained the possible consequences of a default.

“If you want to own a home, a default on your payments would throw that dream into the shredder. If you’re trying to protect your 401(k), failing to pay would rob you of your livelihood,” Schumer said.

Biden’s forthcoming overseas trip to meet with allies in Japan, Papua New Guinea and Australia adds pressure to Tuesday’s debt ceiling meetings. The President is expected to depart on Wednesday and is expected to be absent for about a week.

McCarthy appeared to criticize Biden’s timeline Tuesday, telling ABC he believes “the American public wants an American president who is focused on American problems and American solutions.”

Biden said last week that the debt ceiling negotiations made it “possible but unlikely” to skip the G7 summit.

“I’m still committed,” he said of the trip. “But obviously this is the most important thing on the agenda.”

White House spokesman John Kirby said Monday that Biden “still intends to depart as planned” on his Indo-Pacific trip.

Biden’s schedule isn’t the only issue, as the House of Representatives will be out of town starting May 26 and will return on June 5, while the Senate will be away from May 22-29 according to tentative schedules.

The so-called “Big Five” last met a week ago to discuss the debt ceiling, a meeting that ended with no sign of an agreement. Since then, staff-level discussions have continued between administration and convention leaders.

Biden and Democrats have insisted that Republicans take the default off the table and separate the debt ceiling from the 2024 budget. Republicans, on the other hand, said they did their job by passing the Limit, Save, Grow Act last month, which raised the debt ceiling and implemented deep spending cuts.

Potential areas of agreement at the budget talks include recovering billions of dollars in unspent COVID-19 aid and reforming the energy project permitting process, sources familiar with the talks told ABC News.

Schumer said Tuesday the financial talks were “separate but tied to our responsibility to avoid a default.”

“Democrats will not use the risk of a default to get what we want,” Schumer said in the Senate. “Nobody should be held hostage.”

McConnell, meanwhile, said it’s up to Biden to “pretend the last election didn’t happen or sit down with the speaker and be responsible about the test of our nation.”

“Time is of the essence, of the essence. So I’ll be happy to sit in the White House for a second time to support Speaker McCarthy and urge President Biden to act,” McConnell continued.

Biden said over the weekend he remains “optimistic” that both sides could come to a resolution.

“I really think there’s a desire on both their side and ours to reach an agreement,” he said during a bike ride in Delaware. “I think we’ll make it.”

But McCarthy downplayed any signs of progress on Monday, telling ABC News the two sides were “a long way from reaching a conclusion.”

“I don’t think we’re doing well,” McCarthy later said during a pro-police news conference. “I know we don’t.”

ABC News’ John Parkinson contributed to this report.