Treasury Secretary warns of dire consequences should Congress fail to raise debt ceiling

Treasury Secretary Janet Yellen issued a grave warning Tuesday regarding the potential negative economic effects if Congress fails to raise the debt ceiling. Her comments came at a Senate Banking Committee hearing.

“It is imperative the Congress address the debt limit. If not, our current estimate is the Treasury will likely exhaust its extraordinary measures by October 18th,” Yellen said in her debt ceiling warning. “The full faith and credit of the United States would be impaired and our country would likely face a financial crisis and economic recession as a result.”

According to Yellen, this could impact everyday Americans. “It would undermine confidence in the dollar as a reserve currency and the interest payments of ordinary Americans on their mortgages and on their cars and on their credit cards would all go up,” she said.

Yellen’s warning comes a day after the Senate voted against a bill that would raise the debt ceiling and avoid a looming government shutdown on Thursday.

In addition to the debt ceiling warning, Yellen endorsed President Joe Biden’s $3.5 trillion “Build Back Better” agenda.

“Over the course of American history, we have seen inflection points where policymakers had the courage to think big and act big to address longstanding flaws in the prevailing economic landscape,” Yellen said. “We face a similarly significant moment today where Congress can think big and act big to decisively send us down a better path.”

Her endorsement comes the same day President Biden meets with Democratic Senators Joe Manchin and Kyrsten Sinema to discuss the bill. Their negotiations could lead to a trimming of the bill’s final price tag.

Both Senators Manchin and Sinema have said they would not be able to support a $3.5 trillion bill, but haven’t suggested a smaller amount.

“In the next day or so we hope to come to a place where we can all move forward,” House Speaker Nancy Pelosi told reporters at the Capitol Tuesday.

A test vote on the $3.5 trillion bill is expected Thursday.