‘Catastrophic’: Treasury Secretary Sounds Alarm on Economic Recession if Congress Fails to Raise Debt Ceiling

Treasury Secretary Janet Yellen on Tuesday predicted an impending recession if Congress failed to raise the debt ceiling.

“I do regard Oct. 18 as a deadline,” Yellen said in an interview with CNBC’s Squawk Box. 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. I fully expect it would cause a recession as well.”

Yellen has been using emergency measures to pay U.S. receipts since the feds reached the debt ceiling in July. Financing is set to run dry by Oct. 18. unless Congress takes action.

She also opined on the U.S. economy’s fragility, saying it was still reeling from the Covid-19 pandemic.

“We have been hit by an incredibly unusual shock — on the one hand, we’re almost six million jobs short of where we were before the pandemic, which means a lot of people who still need jobs,” Yellen said. “On the other hand, many firms are finding it difficult to hire. We’ve had extraordinary shifts in the pattern of demand away from services and toward goods, and I know the Fed is trying to sort through the implications of that.

“Supply bottlenecks have developed that have caused inflation,” she added. “I believe they’re transitory, but that doesn’t mean they’ll go away over the next several months.”

Watch above via CNBC.