Treasury Secretary Janet Yellen said Thursday that the debate over the US debt ceiling amounts to “flirting with a self-inflicted crisis” but that everyone “breathed a sigh of relief” after Democrats and Republicans reached a deal to avert economic disaster.
“It’s important that we have met that deadline and didn’t go, you know – it looks like it will be voted on this evening – that we haven’t gone right up against the wire. But we do need to settle it longer term,” Yellen told CNN’s Erin Burnett on “OutFront.”
“You know, what we’re really talking about here is can you count on the government to pay its bills? It’s not about future spending or taxes. We’ve incurred bills. Can the government be counted on to pay those bills? And Americans, whether it’s people waiting for a Social Security check or military pay or bondholders who regard US Treasuries as the safest asset in the world, they need to never question that the United States will pay its bills.”
Her comments came hours before the Senate voted Thursday evening to extend the debt limit through early December. The House now must approve the deal before it can be sent to President Joe Biden for his signature.
Yellen has warned lawmakers for weeks that there would be catastrophic consequences if the borrowing limit isn’t raised. “A delay that calls into question the federal government’s ability to meet all its obligations would likely cause irreparable damage to the U.S. economy and global financial markets,” she wrote in a letter to Congress last month.
On Thursday, Yellen suggested it’s become “increasingly damaging” to even set a debt ceiling. “It’s led to a series of politically dangerous conflicts that have caused Americans and global markets to question whether or not America is serious about paying its bills,” she said, calling it “an impossible situation.”
“Congress needs to debate these issues when they’re deciding on spending and taxation, not to, every several years, put a hard stop and say, ‘Well, now we’re not going to let the treasury secretary pay the nation’s bills,’ ” she continued.
The treasury secretary also pushed back against criticism that the President’s legislative priorities, including the bipartisan infrastructure bill and the reconciliation package, would incur further debt, stating, “All that is paid for.”
“That’s not deficit spending, that’s a package where revenues will be raised that will fully cover the cost of that spending,” Yellen said. “So, you know what, people can have different opinions about the value of the package and whether they support it. I am strongly in support, because I think it’s what this economy needs to be more productive, to grow faster, to be a fairer economy.”
This story has been updated with further developments Thursday.