On Tuesday, Treasury Secretary Janet Yellen said the United States must raise the debt ceiling or face dire consequences. Yellen testified before the Senate Banking Committee and warned of a likely recession if Congress did not raise the nation’s debt ceiling by Oct. 18, via The AP.
Yellen testified shortly after Republicans in the Senate, led by Senate Minority Leader Mitch McConnell, blocked a measure that would have solved the issue at hand. Yellen also warned of rising interest rates and an emptying of the treasury to pay for the nation’s higher interest payments on treasury notes.
While the government has been able to raise the debt ceiling multiple times in the past to accommodate for revenue and spending decisions, including three times under the Trump administration. Congress has faced difficulty in coming to a consensus on the issue, with several Republicans opposing the measure.
Yellen again sent a message to senators urging them not to wait until the last minute to resolve the issue.
“Waiting until the last minute … can cause serious harm to business and consumer confidence, raise borrowing costs for taxpayers and negatively impact the credit rating of the United States for years to come,” Yellen said.
The battle over the debt ceiling on Capitol Hill came to a climax on Thursday when Congress passed a continuing resolution to fund the government through at least Dec.3, hours before the midnight deadline. This will avoid a feared government shutdown that would have put thousands of federal employees out of work as the economy continues to recover from the COVID-19 pandemic, according to The AP.
The issue of the debt ceiling was not answered in this continuing resolution as Senate Republicans refused to pass any measure that would raise the debt ceiling. McConnell insisted Senate Democrats have the votes to raise the debt ceiling on their own.
“We’re able to fund the government today because the majority accepted reality. The same thing will need to happen on the debt limit next week,” McConnell said.
The continuing resolution, in addition to keeping the government open, will also provide $28.6 billion in Hurricane Ida disaster relief and money for those evacuating Afghanistan.
Democrats in Congress will try to raise the debt ceiling in the coming weeks, in addition to attempting to pass an ambitious $1 trillion infrastructure bill and a $3.5 trillion social safety net and climate bill.