Failure to raise the debt ceiling will delay child tax credit payments and Social Security checks, causing 'economic catastrophe,' Janet Yellen says

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Janet Yellen. Manuel Balce Ceneta/AP
  • Treasury Sec. Janet Yellen warned of an "economic catastrophe" if the debt limit isn't raised.

  • In a WSJ opinion piece, she said it would delay needed Social Security benefits, among other things.

  • Despite calls for bipartisan support, the GOP vowed Democrats will have to raise the limit alone.

  • See more stories on Insider's business page.

Earlier this month, Treasury Secretary Janet Yellen wrote a letter to congressional leadership stressing the urgency of raising the debt limit, given that the government's money will likely run out in October due to financial uncertainty caused by the pandemic.

With October just 10 days away, Yellen doubled down on the need for Congress to act quickly, citing how failure to raise the limit will hurt Americans across the country.

"In a matter of days, millions of Americans could be strapped for cash," Yellen wrote in an opinion piece for The Wall Street Journal. "We could see indefinite delays in critical payments. Nearly 50 million seniors could stop receiving Social Security checks for a time. Troops could go unpaid. Millions of families who rely on the monthly child tax credit could see delays. America, in short, would default on its obligations."

The White House last week expressed the same concerns as Yellen, warning in a memo to state and local governments that a government default could lead to potential big cuts in measures like Medicaid and free school lunches.

After Congress missed a July 30 deadline to raise or suspend the debt ceiling, the US Treasury employed "extraordinary measures" to keep paying off the government's bills, but as Yellen warned in her letter to Congress, those measures will likely run out next month, warranting speedy, bipartisan action to prevent a government default.

Insider's Joseph Zeballos-Roig and Andy Kiersz reported on another extraordinary measure that Treasury could turn to: minting a platinum coin worth $1 trillion. Treasury officials have long ruled this out, however. Yellen's tone on that matter was unchanged in her opinion article.

"Paying America's bills shouldn't be a controversial issue," Yellen wrote. But right now, it is. Republican lawmakers vowed Democrats will have to go at it alone, with 46 of them last month signing a letter agreeing they would not play a part in raising the debt ceiling given Democrats' "irresponsible spending" with their $3.5 trillion social spending bill.

Senate Minority Leader Mitch McConnell reinforced his party's position on the debt limit last week, telling Punchbowl News that it's Democrats' obligation to ensure the government doesn't default.

"They should step up. It's hard being in the majority. They are the ones who will raise the debt limit," he said, adding, "Do you guys think I'm bluffing?"

But Speaker of the House Nancy Pelosi said in a Sunday letter that raising the limit "has long been bipartisan," and she wants that to remain the case.

"Indeed, since 2011, every time the debt limit has needed to be raised, Congress has addressed it on a bipartisan basis, including three times during the last Administration," Pelosi wrote. "When we take up the debt limit this month, we expect it to be bipartisan once more."

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