America will suffer a recession or financial crisis unless Congress amends the federal debt limit, an economic advisor to the president said on Sept. 28.
Janet Yellen (D) warned the House speaker she has less than three weeks to avoid an economic slump after Oct. 18.
“It is uncertain whether we could continue to meet all [of] the nation’s commitments after that date,” she said in a letter to Nancy Pelosi.
The Treasury secretary believes raising or suspending the statutory debt ceiling could help avert unnecessary financial pain. However, this must be done as soon as possible.
“Waiting until the last minute can cause serious harm to business and consumer confidence, raise borrowing costs for taxpayers, and negatively impact the credit rating of the United States for years to come,” Yellen said in the letter. “Failure to act promptly could also result in substantial disruptions to financial markets.”
The remarks came after the stock market suffered its worst day since May 2021. Investors are worried about a possible government shutdown, debt default, persistent inflation, the Delta variant, and Federal Reserve withdrawing economic support measures.
She also warned Pelosi that child tax credit payments could be suspended for 30 million families, and social security payments delayed for 50 million elderly recipients. The unemployment rate could also jump.
Senate Republicans recently blocked a bill to suspend the debt ceiling and prevent a government shutdown on Oct. 1.
The GOP is willing to support a stand-alone bill that extends government spending into early December 2021. However, Republicans are unwilling to support suspending the debt ceiling.
Senate Democrats are considering their options.