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Yellen warns of ‘catastrophe’ if Congress doesn’t handle debt ceiling issue

WASHINGTON — U.S. Treasury Secretary Janet Yellen mentioned there may be an “huge quantity at stake” after the Senate authorised solely a short-term extension of the debt ceiling, establishing one other potential default in December if Congress is unable to make one other deal.

“A failure to lift the debt ceiling would in all probability trigger a recession, and will even lead to a monetary disaster, it will be a disaster,” mentioned Yellen on ABC’s ‘This Week’ on Sunday.

Her feedback come simply days after the Senate handed a invoice to increase the debt restrict by way of early December, briefly ending a partisan standoff earlier than the federal government’s deadline of Oct. 18 to keep away from a default. The Home, which was scheduled to be out subsequent week, will return Tuesday and is predicted to move the measure.

Yellen laid out the potential penalties of the debt ceiling not being raised. 50 million Individuals receiving social safety funds could be put in danger, troops would not know when or if they might be paid and funds for the kid tax credit score, which 30 million households obtain, could be in jeopardy.

The Senate vote on the settlement wanted 60 votes, that means ten Republican votes have been wanted to bypass the GOP filibuster to make it to the simple-majority last passage vote. Whereas these ten votes have been secured, no Republicans joined Democrats within the last vote on the invoice’s passage, signaling one other battle is prone to occur later this yr.

Senate Minority Chief Mitch McConnell despatched a warning to President Joe Biden on Friday, saying Republican leaders will not work with Democrats on “any future effort to mitigate the implications of Democratic mismanagement.”

“Your lieutenants on Capitol Hill now have the time they claimed they lacked to deal with the debt ceiling by way of standalone reconciliation, and all of the instruments to do it. They can’t invent one other disaster and ask for my assist,” mentioned McConnell.

Yellen was requested immediately what the implications could be if McConnell retains his phrase, she responded: “Properly, it is completely crucial that we increase the debt ceiling, that is essential to not fund any new spending packages, however to pay the payments that outcome from Congress’s requested choices.”

After passing the Home, the invoice would then head to Biden, who is predicted to signal it. The Senate is on a scheduled recess this upcoming week.

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