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Treasury Secretary Janet Yellen called on Congress to increase the federal government’s debt limit by December, warning on Sunday that inaction could cause a recession.
The Senate’s vote on Thursday extended the government’s borrowing authority into December — when another showdown between Democrats and Republicans is likely.
If the debt ceiling isn’t raised again, the consequences would include missed Social Security payments, failure to pay troops and a potential blow to the country’s credit rating, Yellen said on ABC’s “This Week.”
“There is an enormous amount at stake. A failure to raise the debt ceiling would probably cause a recession and could even result in a financial crisis,” she said.
She dismissed the suggestion of using the 14th Amendment — which states in part that the “validity of the public debt of the United States ... shall not be questioned” — to take on more debt.
“It’s Congress’ responsibility to show that they have the determination to pay the bills that the government amasses,” Yellen said. “We shouldn’t be in a position where we need to consider whether or not the 14th Amendment applies.”
Senate Republicans have been trying to force Democrats to raise the debt ceiling on their own.
Last week, Senate Minority Leader Mitch McConnell, R-Ky., agreed to let the Democrats take a vote on a short-term extension but said they would have to use an arcane procedure called reconciliation for a longer-term extension come December.
At issue is a cap on how much money the federal government is allowed to borrow.
Congress used to pass regular increases with little drama, but in recent years fiscal conservatives have pounced on the opportunity to voice concerns about government spending.
Meanwhile, Senate Democrats are working to pass a global corporate tax rate that 130 countries agreed upon last week.
The deal, which has come under criticism by Republicans, would apply a 15% tax to big international businesses.
Democrats are expected to try to pass the tax through a process of budget reconciliation.
“I am confident that what we need to do to come into compliance with the minimum tax will be included in a reconciliation package,” Yellen said.
“It’s something that is very important for American workers to stop what’s been a decadeslong race to the bottom on corporate taxation.”