U.S. Treasury Secretary Janet Yellen on Sunday warned that U.S. economic recovery would reverse into recession if Congress fails to swiftly raise the federal debt limit.
"Congress has raised or suspended the country's debt ceiling about 80 times since 1960. Now it must do so again," Yellen said in a Wall Street Journal op-ed.
"If not, sometime in October-it is impossible to predict precisely when-the Treasury Department's cash balance will fall to an insufficient level, and the federal government will be unable to pay its bills," Yellen said, warning failing to raise the debt limit would produce "widespread economic catastrophe."
"In a matter of days, millions of Americans could be strapped for cash. We could see indefinite delays in critical payments. Nearly 50 million seniors could stop receiving Social Security checks for a time. Troops could go unpaid," she said.
Yellen also warned that a default on U.S. debt would "likely precipitate a historic financial crisis" that would compound the damage of the continuing public health emergency.
"Default could trigger a spike in interest rates, a steep drop in stock prices and other financial turmoil. Our current economic recovery would reverse into recession, with billions of dollars of growth and millions of jobs lost," she said, adding the U.S. would emerge from this crisis "a permanently weaker nation."
"Neither delay nor default is tolerable. The past 17 months have tested our nation's economic strength. We are just now emerging from crisis. We must not plunge ourselves back into an entirely avoidable one," said the treasury secretary.
Business Roundtable, an association of over 200 chief executive officers of America's leading companies, also warned U.S. congressional leaders of the prospect of an economic crisis if they fail to swiftly raise the debt limit.
"Failure to lift the U.S. federal debt limit to meet U.S. obligations would produce an otherwise avoidable crisis and pose unacceptable risk to the nation's economic growth, job creation and financial markets," the association said Wednesday in a letter to congressional leaders.
As part of a bipartisan budget deal enacted in August 2019, Congress suspended the debt limit through July 31. After the debt limit was reinstated on Aug. 1, U.S. Treasury Department began using "extraordinary measures" to continue to finance the government on a temporary basis.
The debt limit, commonly called the debt ceiling, is the total amount of money that the U.S. government is authorized to borrow to meet its existing legal obligations, including social security and medicare benefits, interest on the national debt, and other payments.