Treasury Secretary Janet Yellen issued another stark warning on Tuesday, saying the U.S. economy would go into a recession if Congress doesn’t do something about the debt ceiling within the next two weeks and help the government avoid defaulting on its debts.
By Vance Cariaga
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For now, the U.S. Treasury Department is using “extraordinary measures” to pay bills, CNBC reported, and has been since hitting the last debt ceiling in late July. But that strategy will only work for so long, and Yellen has warned that the government will no longer be able to pay its bills on or about Oct. 18.
“I do regard Oct. 18 as a deadline,” Yellen told CNBC. “It would be catastrophic to not pay the government’s bills, for us to be in a position where we lacked the resources to pay the government’s bills.”
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“I fully expect it would cause a recession as well,” she continued.
A recession would not only put an end to the economic momentum that began earlier this year as COVID-19 restrictions eased, but it would also send the economy in the opposite direction.
Still, some financial experts hold out hope that something will be done to avoid a debt-ceiling disaster.
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Scott Knapp, chief market strategist at CUNA Mutual Group, called the debt ceiling debate “a low-risk event” that financial markets have “mostly ignored” in the past.
