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Treasury’s Yellen: Not Raising Debt Ceiling ‘Would Be A Catastrophe’

By News Creatives Authors , in Business , at October 10, 2021

Topline

A failure by Congress to raise the debt ceiling would “probably cause a recession” and could even result in a financial crisis, treasury secretary Janet Yellen said.

Key Facts

Yellen called the move to raise the debt ceiling “absolutely imperative” in order to continue funding critical programs like Social Security and Medicare, along with child tax credits and military paychecks, during a Sunday morning appearance on ABC’s This Week.

The nation’s credit rating is also in jeopardy, Yellen said, saying that maintaining the debt ceiling would underpin the reserve status of the U.S. dollar and threaten U.S. treasuries, which Yellen called “the world’s safest possible asset.”

Yellen told host George Stephanopoulos she supports eliminating the debt ceiling entirely, calling the continuous raising of the debt ceiling “a housekeeping chore.”

Lawmakers should hammer out details of the government’s fiscal policy as they make decisions on legislation involving U.S. spending and taxes, “not when the credit card bill comes due,” Yellen said.

Crucial Quote

“There’s an enormous amount at stake. A failure to raise the debt ceiling would probably cause a recession, and could even result in a financial crisis. It would be a catastrophe,” Yellen said.

Key Background

The Senate voted Thursday to approve a truce that will temporarily increase the debt ceiling, just days before the nation would have faced a debt default. However, Democrats and Republicans have still not agreed on a long-term solution that will allow the federal government to continue paying its debts past December 3, when the stopgap bill expires. The two parties have gone head-to-head for weeks over the issue of the debt ceiling. Democrats are invested in working out a bipartisan legislative solution to the debt ceiling issue, while Republicans insist that Democrats slash their proposed $3.5 trillion spending package.

Further Reading

Senate Passes Stopgap Bill To Raise Debt Ceiling, But Long-Term Solution Still Unclear (Forbes)

Tens Of Millions Of Americans Could Lose Benefits ‘Overnight’ If U.S. Defaults This Month, White House Warns (Forbes)

Republicans Block Democratic Effort To Raise The Debt Ceiling As Officials Warn Of Economic Catastrophe (Forbes)

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