Yellen: Not Raising Debt Ceiling Could ‘Eviscerate Our Current Recovery’ During Economic Update

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Treasury Secretary Janet Yellen testified before Congress Monday, Nov. 29, telling the Committee on Banking, Housing, and Urban Affairs that not resolving the debt ceiling issue in time “will eviscerate our current recovery.”

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As consequential as November was, December promises to be more so, as there are two decisions facing Congress that could send our economy in very different directions, Yellen wrote in prepared remarks.

The first is the debt limit.

“I cannot overstate how critical it is that Congress address this issue. America must pay its bills on time and in full. If we do not, we will eviscerate our current recovery. In a matter of days, the majority of Americans would suffer financial pain as critical payments, like Social Security checks and military paychecks, would not reach their bank accounts, and that would likely be followed by a deep recession,” she wrote.

The second issue involves the Build Back Better legislation, she wrote, adding that she applauds the House for passing the bill and is hopeful that the Senate will soon follow.

“Build Back Better is the right economic decision for many reasons. It will, for example, end the childcare crisis in this country, letting parents return to work. These investments, we expect, will lead to a GDP increase over the long-term without increasing the national debt or deficit by a dollar. In fact, the offsets in these bills mean they actually reduce annual deficits over time.”

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Yellen also noted in her remarks that the progress of the economic recovery can’t be separated from the progress against the pandemic.

“I know that we’re all following the news about the Omicron variant,” she wrote. “As the President said yesterday, we’re still waiting for more data, but what remains true is that our best protection against the virus is the vaccine. People should get vaccinated and boosted.”

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Last month, Yellen Yrevised her Oct. 18 debt ceiling estimate, saying that the U.S. will reach its debt ceiling on Dec. 15, giving Congress two additional weeks to come to an agreement.

“In my October 18 letter to you, I noted that the recent $480 billion increase in the debt limit provided a high degree of confidence that Treasury would be able to finance the U.S. government through Dec. 3, 2021. Based on our most recent information, I am now able to further refine that projection,” Yellen wrote in the letter.

Her revised timeline stemmed from President Joe Biden’s signing the Infrastructure Investment and Jobs Act, “which appropriates $118 billion for the Highway Trust Fund.”

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