Treasury Secretary Janet Yellen on Monday renewed her push for Congress to raise the debt ceiling before the U.S. government runs out of cash in early December, but she said Democrats should be willing to address the issue on their own if Republicans refuse to act in a bipartisan manner to avoid a first-ever debt default.
"There are a number of ways in which the debt ceiling can be raised," Yellen told reporters during a news conference in Dublin following Group of 20 meetings in Rome. "I strongly believe that it is bipartisan responsibility to do this. There is a way for Democrats to do it entirely on their own."
Congress approved a short-term debt limit increase in early October, raising the borrowing limit by $480 billion after a lengthy partisan battle. But the agreement did nothing to resolve the broader disagreement between Democrats and Republicans over the debt, teeing up another showdown for the end of the year.
Lawmakers have until Dec. 3, when the treasury will exhaust the extraordinary measures it's using to temporarily finance the government, to raise or suspend the debt ceiling. The current debt limit is around $28.4 trillion.
Yellen has repeatedly urged lawmakers to act in a bipartisan manner to extend the government's borrowing limit or else risk a debt default that could trigger "catastrophic" economic effects and an unprecedented financial crisis that would ripple worldwide. Although lawmakers typically work across the aisle to address the debt ceiling, it's become a political football of sorts in recent years.
She suggested Democrats could use a procedural tool known as reconciliation, which would allow them to bypass a 60-vote filibuster by Republicans in the Senate, to raise the limit of GOP lawmakers if refuse to do so.
"Should it be done on a bipartisan basis? Absolutely. Now, if they’re not going to cooperate, I don’t want to play chicken and end up not raising the debt ceiling. I think that’s the worst possible outcome," Yellen told The Washington Post in a separate interview. "If Democrats have to do it by themselves, that’s better than defaulting on the debt to teach the Republicans a lesson."
Raising the debt ceiling allows the Treasury Department to borrow money to cover its existing financial obligations, including spending approved by both the Trump and Biden administrations.
For months, GOP lawmakers attempted to put the onus of raising or suspending the debt limit on Democrats, arguing that with a power monopoly in Washington, the party should go it alone using the budget reconciliation process. Democrats countered that there was not enough time to use reconciliation with the U.S. careening toward a catastrophic default and noted they had voted twice with Republicans during the Trump administration to suspend the ceiling.
Republicans eventually acquiesced, with 11 GOP lawmakers helping Democrats temporarily raise the ceiling. Despite the deal, Senate Minority Leader Mitch McConnell has not dropped his demand that Democrats ultimately use reconciliation to raise the ceiling beyond December – and warned he would not help increase the debt limit again.
"I will not be a party to any future effort to mitigate the consequences of Democratic mismanagement," McConnell wrote in a scathing letter addressed to President Biden. "Your lieutenants on Capitol Hill now have the time they claimed they lacked to address the debt ceiling."
If the U.S. failed to raise or suspend the debt limit, it would eventually have to temporarily default on some of its obligations, which could have serious and negative economic implications. Interest rates would likely spike, and demand for Treasurys would drop; even the threat of default can cause borrowing costs to increase.
Yellen has also suggested that lawmakers should eliminate the debt ceiling altogether, a position not endorsed by Biden or other White House officials.
"It is my view — it’s not the White House view; it’s not the president’s view; they haven’t weighed in on this — but I personally feel we should not have a debt ceiling," Yellen told the Post.