Janet Yellen warns U.S. default would reverse 'hard-earned' economic progress

May 16 (UPI) -- Treasury Secretary Janet Yellen urged Congress to immediately raise the debt ceiling on Tuesday, reiterating her warnings of dire consequences for financial markets if it is not increased.

Speaking at the Independent Community Bankers of America Capital Summit, Yellen said that a default on the debt could result in more than eight million people losing their jobs, while also wiping out years of retirement and other household savings would also be wiped out.

"In my assessment -- and that of economists across the board -- a U.S. default would generate an economic and financial catastrophe," Yellen said. "Over the past few years, American families and businesses -- including many of yours -- have worked to mount a historic economic recovery. A default would reverse all of the hard-earned progress that we've made. And it would set us back even further."

Yellen also said Tuesday that 66 million Social Security payments would immediately stop if there was a default.

"A default could cause widespread suffering as Americans lose the income that they need to get by," Yellen said. "And the resulting income shock could lead to a recession that destroys many American jobs and businesses."

"The U.S. economy hangs in the balance," she added. "The livelihoods of millions of Americans do too. There is no time to waste. Congress should address the debt limit as soon as possible."

On Monday, Yellen reiterated that the United States was on course to default on its national debt as early as June 1.

"It is impossible to predict with certainty the exact date when Treasury will be unable to pay all of the government's bills. And I will provide an additional update to Congress next week as more information becomes available," she said Tuesday. "Nonetheless, our current best estimate underscores the urgency of this moment: it is essential that Congress act as soon as possible."

Yellen's warning came as President Joe Biden is set to hold a second meeting with congressional leaders with House Speaker Kevin McCarthy, R-Calif., House Democratic leader Hakeem Jeffries, D-N.Y., Senate Democratic leader Chuck Schumer, D-N.Y., and Senate Republican leader Mitch McConnell, R-Ky., to discuss raising the debt ceiling.

Biden has argued that Congress should raise the debt ceiling without conditions, while McCarthy has pushed for a law that would slash federal programs to raise the debt ceiling by $1.5 trillion over the next year.

"Raising or suspending the debt limit does not authorize new federal spending. It simply allows the government to make good on its existing commitments," Yellen said. "Let me be clear: if Congress does not address the debt limit, there are no good options that Treasury or the government can use to save us from catastrophe."