U.S. Treasury Secretary Janet Yellen warned Sunday of “catastrophe” if Senate Republicans’ unwillingness to raise the debt ceiling causes the U.S. to default in December. Following a long standoff, the Senate late Thursday approved a bill to extend the debt ceiling through Dec. 3. But Senate Minority Leader Mitch McConnell, R-Ky., and other Republicans have been adamant that they won’t vote to raise the debt limit, raising the specter of another round of brinkmanship in December.
“There’s an enormous amount at stake,” Yellen said Sunday on ABC News’ “This Week.” “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.”
“It’s absolutely imperative that we raise the debt ceiling,” Yellen added. “That’s necessary not to fund any new spending programs, but to pay the bills that result from Congress’ past decisions.” Among other things, a default would stop Social Security payments, military paychecks and families’ child tax credits, she said. Yellen said Sunday she supports eliminating the debt ceiling — which has become more of a political tool in recent years — entirely. “We should be debating the government’s fiscal policy when we decide on those expenditures and taxes, not when the credit card bill comes due,” she said, noting that that decision ultimately lies with Congress. Yellen also said she is confident that Congress will approve a minimum corporate tax rate to align with last week’s historic global agreement, and dismissed speculation of minting a trillion-dollar coin to resolve the debt-ceiling issue, calling the idea a “gimmick.”