Treasury Secretary Janet Yellen on Tuesday warned House Speaker Nancy Pelosi, D-Calif., that Congress must address the debt ceiling by Oct. 18 to avoid near-certain economic disaster.
"We now estimate that Treasury is likely to exhaust its extraordinary measures if Congress has not acted to raise or suspend the debt limit by October 18," Yellen wrote in a letter to Pelosi, CNBC reported.
"At that point, we expect Treasury would be left with very limited resources that would be depleted quickly."
In a separate statement to lawmakers, Yellen said that failure to suspend or raise the debt limit would have severe consequences for the U.S. economy.
"It is imperative that Congress swiftly addresses the debt limit. If it does not, America would default for the first time in history," she said in remarks to be given to the Senate Banking Committee on Tuesday.
"The full faith and credit of the United States would be impaired, and our country would likely face a financial crisis and economic recession."
Yellen and Federal Reserve chair Jerome Powell were set to testify before Senators on Tuesday. They will appear before the House Financial Services Committee on Thursday.
Most economists say a default would bring about financial catastrophe that could cause a broad market sell-off and economic downturn amid a spike in interest rates.
Pelosi and Senate Major Leader Chuck Schumer, D-N.Y., have called upon House Minority Leader Kevin McCarthy, R-Calif., Senate Minority Leader Mitch McConnell, R-Ky., and Republicans to pass a suspension to the debt ceiling as a bipartisan duty.
"Now, as Minority Leaders McCarthy and McConnell welcome a disaster they both know is coming, Republican luminaries, former Treasury Secretaries, business groups, and top economists are joining the growing chorus of Americans demanding that they stop putting politics over the health of the U.S. economy," Pelosi’s office said last week, CNBC said.
On Monday night, Senate Republicans blocked a House-approved bill that would fund the government. The GOP opposed the legislation because it included a provision to suspend the debt ceiling — something Republicans say should fall to Democrats alone.
The U.S. government will shut down at the end of September if lawmakers fail to approve a new funding or appropriations bill.
Raising or suspending the debt ceiling does not authorize new federal spending, but allows the Treasury to honor debts already incurred.
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