US Treasury Secretary Janet Yellen has renewed her call for Congress to raise the federal debt ceiling in a bid to avoid a historic financial crisis.
If Congress fails to do so, the government will run out of money to pay its bills sometime in October, Yellen wrote in a Wall Street Journal opinion piece.
“The overwhelming consensus among economists and Treasury officials of both parties is that failing to raise the debt limit would produce widespread economic catastrophe.”
The US House is slated to vote next week on raising the US’ $28 trillion debt ceiling amid a standoff between Democrats and Republicans, who have refused to support raising or suspending the current ceiling.
Yellen said that the crisis triggered by a default “would compound the damage of the continuing public health emergency,” plunge the US economy back into recession and leave it a “permanently weaker nation.”
She also described economic damage that would fall on consumers through higher borrowing costs and lower asset prices.
"We can borrow more cheaply than almost any other country, and defaulting would jeopardize this enviable fiscal position. It would also make America a more expensive place to live, as the higher cost of borrowing would fall on consumers," Yellen wrote. "Mortgage payments, car loans, credit card bills—everything that is purchased with credit would be costlier after default."
She went on to say that the debt ceiling is about paying for past spending obligations, noting failing to lift the debt ceiling in time can still cause damage, citing a 2011 debt ceiling crisis that nearly caused the federal government to default, prompting a credit rating downgrade.
"This led to financial-market disruptions that persisted for months. Time is money here, potentially billions of dollars. Neither delay nor default is tolerable."
Meanwhile, House of Representatives Speaker Nancy Pelosi said Congress addressed the debt ceiling on a bipartisan basis three times during the administration of former president Donald Trump.
"When we take up the debt limit this month, we expect it to be bipartisan once more," Pelosi said.
House Majority Whip Jim Clyburn, however, said Sunday that Democrats might have to pass the debt ceiling hike without Republican support.
"I think we ought to do what’s necessary and message to the American people exactly who is trying to destroy this great democracy that we hope to keep in place," he told CNN.