Yellen: "If October 18 Comes, US National Default... Must Avoid Economic Disaster"

Concerns Expressed Over Difficulties in Increasing Debt Ceiling

Janet Yellen, U.S. Secretary of the Treasury, is testifying before Congress on the 28th.
[Image source=Reuters Yonhap News]

[Asia Economy New York=Correspondent Baek Jong-min] Janet Yellen, the U.S. Secretary of the Treasury, warned in Congress that if a decision to raise the national debt ceiling is not made, a default could occur around the 18th of next month.

On the 28th (local time), during her opening remarks at the Senate Banking Committee hearing, Secretary Yellen stated, "Around October 18th, the special measures to address the debt ceiling breach will effectively end. After that, the Treasury will have very limited resources left," warning that "the United States will declare a default for the first time in history."

Although Secretary Yellen had previously mentioned that the U.S. could enter a default situation after mid-October, this is the first time she specified an exact date.

The U.S. debt ceiling stands at $28.5 trillion, but due to increased spending in response to COVID-19, the limit has already been exceeded.

Secretary Yellen expressed concern that a national default would undermine full faith and credit in the United States, triggering a financial crisis and economic recession, and urged Congress to actively seek solutions.

She repeatedly emphasized, "This issue must be resolved. We must avoid a catastrophic event for our economy."

Recalling that the U.S. debt ceiling has been raised or suspended 78 times since 1960, always through bipartisan solutions, Secretary Yellen appealed to lawmakers that raising the debt ceiling is absolutely necessary to build a strong American economy for future generations.

The U.S. Senate, a day earlier, effectively rejected a procedural vote on the combined bill to raise the debt ceiling and pass a temporary budget, with 48 in favor and 50 against.

For the Democrats to overcome Republican opposition and pass the debt ceiling increase and temporary budget, 60 votes in favor were required.

If the U.S. political parties fail to reach an agreement, a federal government shutdown is imminent on October 1st.