Yellen Warns Congress that Debt Limit Must by Raised by Oct. 18

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Treasury Secretary Janet L. Yellen on Tuesday warned lawmakers of “catastrophic” consequences if Congress failed to soon raise or suspend the statutory debt limit, saying inaction could lead to a self-inflicted economic recession and a financial crisis.

At a Senate Banking Committee hearing where she testified alongside the Federal Reserve chair, Jerome H. Powell, Ms. Yellen laid out in explicit terms what she expects to happen if Congress does not deal with the debt limit before Oct. 18, which Treasury now believes is when the United States will actually face default.

Seniors could see their Social Security payments delayed, soldiers would not know when their paychecks were coming and interest rates on credit cards, car loans and mortgages would rise, making payments more costly, she warned. She also suggested that a default would jeopardize the dollar’s status as the international reserve currency, which Democrats argue would be a gift to China.

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