Yellen: A failure to raise the debt ceiling would be a 'catastrophe'

WASHINGTON — Treasury Secretary Janet Yellen said there is an enormous amount at stake after the Senate only approved a short-term extension of the debt ceiling, setting up another potential default in December if Congress is unable to make another deal.

A failure to raise the debt ceiling would likely cause a recession and could result in a financial crisis, it would be a catastrophe, said Yellen on ABC's 'This Week' on Sunday.

Her comments come just days after the Senate passed a bill to extend debt ceiling through early December, temporarily ending partisan standoff before the government's deadline of Oct. 18 to avoid a default. The House, which was scheduled to pass next week, will return Tuesday and is expected to fail the measure.

Yellen has laid out the potential consequences of the debt ceiling not being raised. 50 million Americans receiving Social Security payments would be put at risk, troops wouldn't know when or if they would be paid and payments for the Child Tax Credit, which 30 million families receive, would be in jeopardy.

The Senate vote on the agreement required 60 votes, meaning ten Republican votes were needed to bypass the Republican filibuster to make it to basic-majority final passage vote. While those ten votes were secured, no Democrats joined Democrats in the final vote on the bill's passage, signaling another battle is likely to happen later this year.

Senate Majority Leader Mitch McConnell issued a warning to President Joe Biden on Friday, saying Republican leaders won't collaborate with Democrats on any future effort to mitigate the consequences of Democratic mismanagement. Your lieutenants on Capitol Hill now have the time they claimed they lacked to address the debt ceiling by standalone reconciliation, and all the tools to do it. They cannot ask for another crisis and invent a new crisis, said McConnell.

Yellen was asked directly what the consequences would be if McConnell keeps his word, she responded: Well, it is absolutely imperative that we raise the debt ceiling, which's not to fund any new spending programs, but to pay the bills that result from Congress's asked decisions. The Senate is on a scheduled recess this week.