Yellen has identified Oct. 18 as the must-act date for lawmakers to make some kind of a solution to bypass having the U.S. default on its obligations. She announced Tuesday that it is necessary upon House Speaker Nancy Pelosi and Senate Majority Leader Chuck Schumer to get a fix in place soon.
“What I can tell you is that it is utterly essential that this be done,” Yellen announced 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.”
Speaking about the possibility that the U.S. doesn’t meet its commitments, Yellen announced, “I fully expect it will cause a recession as well.”
Yellen stated that failing to raise the debt ceiling would jeopardize 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 stated. She further pointed out that the U.S. Treasury securities have long been seen as the safest asset in the world, which partially accounts for the reserve status of the U.S. dollar. Yellen announced the nation placing that status in jeopardy by failing to meet any of its obligations “would really be a catastrophic outcome.”
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 revealed multi trillion-dollar spending plans this year. The party wants the Democrats to raise the limit unilaterally.
In the meantime, 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 altogether.
Reconciliation allows a party to pass certain bills with a simple majority in the Senate versus the typical 60-vote requirement, making it protected from the GOP filibuster. McConnell has made it clear no member of his caucus will support attempts to raise the ceiling ahead of the 2022 midterm elections.
“Since mid-July, Republicans have clearly stated that Democrats will need to raise the debt limit on their own,” McConnell wrote to Biden on Monday. “Bipartisanship is not a light switch that Speaker Pelosi and Leader Schumer may flip on to borrow money and flip off to spend it.”