U.S. Treasury Secretary Janet Yellen warned on Tuesday that the U.S. economy could fall into a recession if Congress does not address the debt ceiling issue within two weeks, stating, "It would be catastrophic not to pay government bills." In an interview with CNBC, she indicated that a recession would occur if Congress fails to address the borrowing limit before an "unprecedented default on U.S. debt."
President Joe Biden called on Congress on Monday to raise the debt ceiling this week and avoid approaching "almost certain" economic disruptions. Secretary Yellen has been warning both House Speaker Nancy Pelosi and Senate Majority Leader Chuck Schumer for weeks that the United States would no longer be able to meet its obligations after October 18.
She stated that lawmakers need to raise or suspend the debt ceiling before that date or risk the country's first-ever default. The Treasury Department is currently using what are called "extraordinary measures" to pay U.S. revenues since reaching the last debt ceiling at the end of July.
U.S. lawmakers have a limited time until October 18 to reach an agreement to raise the borrowing limit; otherwise, the United States will deliberately default on its debt for the first time in history. These extraordinary measures allow the administration to maintain cash and draw from certain accounts without issuing new bonds. However, these measures are temporary and are expected to last until mid-October, according to Treasury estimates.
The current debt ceiling, unless raised, prohibits the United States from borrowing more than the cap of $28.4 trillion. The issue typically stirs disputes between the Republican and Democratic parties. The debt ceiling has been raised 80 times since the 1960s. A default by the world's largest economy would be unprecedented and could have dire consequences, with repercussions for the global economy as a whole.
