Yellen: Congress Needs To Raise National Debt Limit To Prevent Default

Treasury Secretary Janet Yellen sounded the alarm bells Wednesday. That’s because she says the U.S. is about to default on its national debt if Congress does not raise the debt limit. 

What Happened: In a Wednesday letter addressed to House Speaker Nancy Pelosi (D-CA), Yellen called on Congress to act quickly to raise the debt limit to ensure the government does not shutdown, as occurred most recently in 2013 and 2018.

Yellen expressed concern that the Treasury won’t be able to fund various government institutions — including the Postal Service, federal employee and retirement system and health benefits fund — if federal representatives don’t act quickly.

“We have learned from past debt limit impasses that waiting until the last minute to suspend or increase the debt limit can cause serious harm to business and consumer confidence, raise short- term borrowing costs for taxpayers, and negatively impact the credit rating of the United States,” Yellen wrote.

Why It Matters: In addition to the myriad of jobs and services the federal government provides, the entire financial system could take a hit if the government runs out of funding, as the U.S. would be unable to pay its creditors. 

Yellen warned the U.S. could default as soon as mid-October, though the pandemic makes it difficult to know a specific date. 

On Wednesday, Pelosi told the press: “We’re paying the Trump credit card with what we would do to lift the debt ceiling,” referring to the tax cuts the Trump administration passed in 2017, which raised the national debt and offered tax breaks for wealthier Americans. 

The House speaker is in support of raising the debt ceiling, as is the White House, per CNN reporting, with both working to garner support from Republicans. 

Photo: Darren Halstead via Unsplash.