Treasury Secretary Janet Yellen warned that the United States would end up in a recession if Congress fails to raise the debt ceiling soon.
Yellen has identified Oct. 18 as the must-act date for lawmakers to craft some kind of solution to avoid having the U.S. default on its obligations. She said Tuesday that it is incumbent upon House Speaker Nancy Pelosi and Senate Majority Leader Chuck Schumer to get a fix in place quickly.
“What I can tell you is that it is utterly essential that this be done,” Yellen said on CNBC. “I do regard Oct. 18th as a deadline. It would be catastrophic to not pay the government’s bills, for us to be in a position where we lack the resources to pay the government’s bills. It really undermines confidence in the full faith and credit of the United States.”
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Speaking about the prospect that the U.S. doesn’t meet its obligations, Yellen said, “I fully expect it will cause a recession as well.”
Yellen said that failing to raise the debt ceiling would endanger Social Security payments for 50 million seniors, payments to the U.S. armed forces, and child tax credit disbursements for millions of families.
“These would be delayed, and the delays would grow longer,” she said.
She also pointed out that U.S. Treasury securities have long been seen as the safest asset in the world, which partly accounts for the reserve status of the U.S. dollar. Yellen said the country placing that status in jeopardy by failing to meet any of its obligations “would really be a catastrophic outcome.”
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Republicans and Democrats are at odds over the debt limit, which has been in the back of lawmakers’ minds for weeks. The GOP is unified in its opposition to a bipartisan lift of the debt ceiling after Democrats unveiled multitrillion-dollar spending plans this year. The party wants the Democrats to raise the limit unilaterally.
Meanwhile, some Democrats are floating alternative solutions to the growing problem, including the Treasury Department minting a $1 trillion platinum coin or the debt ceiling being eliminated entirely.
