Yellen Warns Congress that Debt Limit Must by Raised by Oct. 18

For weeks, Ms. Yellen has been quietly pressing lawmakers to put politics aside and ensure that the United States can continue to meet its fiscal obligations. She has been in touch with Wall Street chief executives and former Treasury secretaries as she looks to keep markets calm and find allies who can help her make the case to recalcitrant Republicans, who believe Democrats must deal with the debt limit on their own.

“It is imperative that Congress swiftly addresses the debt limit,” Ms. Yellen said. “The full faith and credit of the United States would be impaired, and our country would likely face a financial crisis and economic recession.”

The debt limit is traditionally addressed on a bipartisan basis, but Republicans are refusing to join Democrats in passing legislation to lift the borrowing cap. Republicans argue that Democrats have the votes to lift the debt limit on their own and that they should do so. Democrats argue that Republicans are playing a dangerous political game.

In a tense exchange with Senator John Kennedy, Republican from Louisiana, Ms. Yellen said it was possible that Democrats could lift the debt limit on their own but that Republicans were shirking their responsibility by refusing to cover debts they helped incur.

“It is very important to recognize that raising the debt ceiling is about paying bills that Congress has incurred in the past,” Ms. Yellen said, noting that deficits have been run under Democratic and Republican administrations “It’s a shared responsibility.”

Mr. Kennedy, who was unconvinced, said that Democrats just wanted to tie Republicans to their big spending plans and that a crisis could be averted by Democrats.

“Easy, peasy. Finished. Let’s go have a cocktail,” Mr. Kennedy told Ms. Yellen.

Ms. Yellen also told lawmakers that the economy, while strengthening, is still in a “fragile” state.

Article source: https://www.nytimes.com/2021/09/28/business/economy/yellen-powell-senate.html