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Treasury Secretary Janet Yellen clashed with Senate Republicans on Tuesday and warned the nation faced a “calamity” unless Congress raises or suspends the debt ceiling.
“I think there would be a financial crisis, and a calamity,” Yellen said.
Yellen told lawmakers she would be concerned that failure to lift the debt limit would “undermine confidence in the dollar
DXY,
to be the reserve currency,” and added that ordinary Americans’ interest payments on mortgages, cars and credit cards would all go up.
Earlier in a letter to Congress, Yellen had revealed that the Treasury is likely to exhaust extraordinary measures to keep from defaulting on its debt if Congress has not acted to raise or suspend the debt limit by Oct. 18.
Now read: What happens if the U.S. defaults on its debt?
“At that point, we expect Treasury would be left with very limited resources that would be depleted quickly,” Yellen wrote.
On Monday, Senate Republicans blocked legislation that would have suspended the debt limit.
Sen. John Kennedy, a Louisiana Republican, sparked Yellen’s ire when he said that Democrats had a simple way to raise the debt ceiling but weren’t using it because they wanted Republican “fingerprints” on the legislation.
Yellen said that Republicans should follow the example of Democrats who “pitched in to do their duty to raise the debt limit.”
“Deficits have been run up under both Democratic and Republican administrations. Paying the bills for those deficits is a shared responsibility,” she said.
Kennedy noted that Democrats could amend the budget resolution, which can pass the Senate with only Democratic votes, to include language addressing the debt ceiling.
Yellen said any decision about future strategy would be made by the congressional Democratic leadership.
Barron’s: Opinion: Pointless debt-limit politics are risking a new recession
