US Treasury Secretary Janet Yellen pleaded Sunday for Congress to raise the debt ceiling in order to avoid a “historic financial crisis.”
In an editorial published in the Wall Street Journal, Yellen points out that the United States has always raised the debt ceiling before exceeding its limit.
“The US has never defaulted. Not once.”
“Doing so would likely precipitate a historic financial crisis,” Yellen wrote.
“Default could trigger a spike in interest rates, a steep drop in stock prices and other financial turmoil.”
The debt ceiling, which only Congress can increase, came back into force on August 1 after it had been suspended for two years.
It prohibits the United States from borrowing more than the current $28.4 trillion limit if not raised.
The issue is a regular topic of partisan rancor in Washington. The debt ceiling has been raised about 80 times since the 1960s.
Last week, the Treasury said the United States was set to run out of money sometime in October.
In her editorial, Yellen spelled out a list of potential financial catastrophes that could befall the country if it did not raise the debt limit and could not meet its existing financial deadlines.
“In a matter of days, millions of Americans could be strapped for cash,” she warned.
“Nearly 50 million seniors could stop receiving Social Security checks for a time. Troops could go unpaid.”
“We would emerge from this crisis a permanently weaker nation,” Yellen said.
Yellen recalled the 2011 debt crisis, “debt-limit brinkmanship pushed America to the edge of crisis.”
The Obama-era debt debate impasse saw the country come the closest it had ever been to defaulting.
In the aftermath, debt rating organization Standard and Poor’s degraded the United States’ debt rating to “AAA” and sent shockwaves through the markets.
Yellen said acting sooner rather than later could avoid a repeat of the worst outcomes of 2011.
“Time is money here, potentially billions of dollars,” Yellen wrote.
“Neither delay nor default is tolerable,” she said.
“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.”
