WASHINGTON—U.S. Treasury Secretary Janet Yellen warned county leaders on Tuesday that their residents could lose jobs and federal benefit payments if Congress allows the United States to default on payment obligations by failing to lift the federal debt ceiling.
Yellen, speaking to the National Association of Counties, offered no new details on when the U.S. Treasury may run out of cash and borrowing capacity without a debt limit increase. She has said the United States can pay its bills at least through early June by employing extraordinary cash management measures.
“In my assessment—and that of economists across the board—a default on our debt would produce an economic and financial catastrophe. Many of your residents could ultimately lose their jobs,” Yellen said.
Republicans who control the U.S. House of Representatives, have demanded spending concessions from President Joe Biden in exchange for an increase in the $31.4 trillion debt ceiling. Biden had said he will not negotiate over raising the limit, which is about past spending decisions.
Yellen told county leaders gathered in Washington that since the U.S. Treasury’s founding in 1789, it has paid U.S. bills on time and “it should stay that way.”
To prevent an “economic catastrophe,” she added that Congress should raise or suspend the limit without conditions and without waiting “until the last minute.”
After a default, “household payments on mortgages, auto loans, and credit cards would rise, and American businesses would see credit markets deteriorate,” she said. “On top of that, it is unlikely that the federal government would be able to issue payments to millions of Americans, including our military families and seniors who rely on Social Security.”
She said in the longer-term, a default would permanently raise the cost of borrowing.
“Future investments—including public investments—would become substantially more costly.”
