Yellen sees Democratic leaders averting a debt ceiling crisis

Oct 10, 2021

Failure to raise the debt ceiling would likely lead to a recession, Treasury Secretary Janet Yellen warned Sunday, but she’s confident that House Speaker Nancy Pelosi and Senate Majority Leader Chuck Schumer can avert that.

"I have confidence that Speaker Pelosi and Leader Schumer will be able to manage this so that we don’t face this situation," Yellen said on ABC’s "This Week."

Defaulting on the nation’s debt has been avoided for now, Yellen said, referring to legislation just passed by the Senate to raise the debt ceiling into early December, but it’s “absolutely necessary” to pay for Congress’ past decisions in the longer term. She said failure to do that “would probably cause a recession and could even result in a financial crisis.”

Yellen and President Joe Biden last week met with top executives including from JPMorgan Chase, Intel, Nasdaq, Raytheon, Citi and Deloitte to discuss the “disastrous impact” of the country not paying its bills if the debt ceiling isn’t raised.

Host George Stephanopoulos proposed invoking the 14th Amendment to justify continued borrowing. “The text is pretty clear,” he said. “The validity of the public debt of the United States should not be questioned.”

Yellen, though, said the U.S. should never be in that position. “It would be completely irresponsible and a self-inflicted wound that would affect businesses and households and the global economy and the status of the U.S. in the world," she said. "We shouldn’t ever be in that position.”

In the president’s pending infrastructure spending proposals, Sen. Joe Manchin (D-W.Va.) has suggested means testing some programs, but Yellen cautioned there would be a trade-off. Universal programs tend to be popular, but there’s an argument for “the highest income Americans perhaps don’t get the benefit of a program that is most needed by those with lower income," she said.

Another historic agreement Yellen is “confident” will be in the president reconciliation spending package is a 15 percent global minimum tax, something that 130 nations currently support.

“It’s … very important for American workers to stop what’s been a decadeslong race to the bottom on corporate taxation, where countries try to cut their taxes to attract our businesses, to make it harder to keep jobs in the United States,” Yellen said.

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