Yellen Says Republican Debt Ceiling Plan ‘Risky and Dangerous’

Treasury Secretary Janet Yellen takes her seat as she arrives for a House Ways and Means Committee hearing on Capitol Hill in Washington on March 10, 2023. Drew Angerer/Getty Images

Treasury Secretary Janet Yellen offered senators no assurance that a Republican plan to prioritize payment of the nation’s bills to avoid default could be achieved due to the size and complexity of the government’s payment operation.

“There is a reason that Treasury secretaries of both parties have rejected this incredibly risky and dangerous idea, and it’s never been tried before. I cannot give any assurances about the technical feasibility of such a plan,” Yellen told the Senate Finance Committee on March 16.

The Default Prevention Act, introduced by Rep. Tom McClintock (R-Calif.), would allow the government to continue paying high-priority obligations in the event the nation reached its statutory debt ceiling.

Under the proposed law, interest payments on the national debt and Social Security benefits would be prioritized for payment. Members of Congress would not be paid.

Blank checks at the U.S. Treasury printing facility in Philadelphia, Pa., on July 18, 2011. William Thomas Cain/Getty Images

“The government on average makes millions of payments each day and our systems are built to pay all of our bills on time and not to pick and choose which bills to pay,” Yellen said.

“That would be an exceptionally risky, untested, and radical departure from normal payment practices of agencies across the federal government.”

Yellen said also that the Republican plan to prioritize payments, if successful, would ensure that China, which holds a portion of the U.S. debt, would be paid ahead of Social Security recipients.

She called the plan “default by another name.”

The secretary’s remarks echoed her March 9 comments to the House Ways and Means Committee, which is considering the Default Prevention Act. 

The debt ceiling is the statutory limit on the amount of debt the government can hold at one time. It is currently $31.4 trillion. Because the country has almost always operated on a deficit budget, the limit must be continually increased to pay for spending already authorized by Congress.

America approached the debt ceiling on Jan. 19 but forestalled defaulting on the nation’s obligations by taking “extraordinary measures.”

The Congressional Budget Office estimated that those measures will be exhausted by late summer.

President Joe Biden and House Speaker Kevin McCarthy (R-Calif.) held a meeting on Feb. 1 to discuss raising the debt limit but reached no agreement.

McCarthy insists on future spending cuts in exchange for any increase in borrowing. Biden has refused to negotiate on raising the limit because a default would put the full faith and credit of the United States at risk.

The idea of prioritizing bill payments has been floated during past negotiations over raising the debt ceiling.

In 2013 former Treasury Secretary Jack Lew also told the Senate Finance Committee that the scheme probably wouldn’t work.

“Well, Mr. Chairman, I have to tell you, I do not believe there is a way to pick and choose on a broad basis,” Lew said in response to a question.

“The system was not designed to be turned off selectively. So anyone who thinks that it can be done just does not know the architecture of our multiple payment systems, which are very complex.

“They were designed properly to pay our bills. They were not designed to not pay our bills.”

Yellen told the current Finance Committee that refusing to increase the debt ceiling is not an option.

“I consider it essential that Congress come together to recognize that raising the debt ceiling is their responsibility to protect the full faith and credit in the United States,” she said.