Treasury Secretary Janet Yellen is warning of the possibility of the government defaulting, potentially as early as June 1, if the debt ceiling isn't suspended or raised.

What Happened: The Treasury could run out of cash as early as June 1^st and has exhausted all “extraordinary measures” to avert the crisis, Yellen said on ABC's “This Week” on Sunday.

"We have been using extraordinary measures for several months now. And our ability to do that is running out," she said.

While Yellen suggested that it would be appropriate to have negotiations about the budget —  especially in regards to spending priorities — she said, “We do need to raise the debt ceiling to avoid economic calamity."

The Biden administration and the House Republicans are currently at odds over the debt crisis, with the president expressing opposition to a bill passed by the House that would raise the limit but only if spending cuts were also implemented.

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Why It's Important: If the Treasury isn't able to pay off the country’s debt, it would mark the first time the U.S. failed in making good on its payments, Yellen said.

The government would have to default on interest payments due on the debt or disrupt payments to Social Security recipients or Medicare providers, she said. "It's widely agreed that financial and economic chaos would ensue," she added.

Yellen also warned of consequences for financial markets and ramifications for the country’s creditworthiness.  "U.S. Treasury securities are the safest bedrock security underlying the global financial system," she explained.

The treasury secretary said there would additionally be higher borrowing costs for Americans looking to buy a home or a car.

Yellen said the priority right now is to ensure that Congress does its job. "There is no way to protect our financial system and our economy other than Congress doing its job and raising the debt ceiling and enabling us to pay our bills," she said.

President Joe Biden is expected to meet with House Speaker Kevin McCarthy (R-Calif), Senate Minority Leader Mitch McConnell (R-KY) and top Democrats at the White House on Tuesday to discuss the debt ceiling.

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Photo: International Monetary Fund via flickr