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U.S. faces a recession if Congress doesn’t address the debt limit within 2 weeks, Yellen says

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Treasury Secretary Janet Yellen on Tuesday said she believes the economy would fall into a recession if Congress fails to address the borrowing limit before an unprecedented default on the U.S. debt.

“I do regard Oct. 18 as a deadline. 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,” Yellen said during a “Squawk Box” interview.

President Joe Biden on Monday called on Congress to raise the debt limit this week and avoid even approaching near-certain economic turmoil. He blamed Republicans and Senate Minority Leader Mitch McConnell, R-Ky., for standing in the way of legislation that would lift the borrowing cap through a filibuster.

“I fully expect it would cause a recession as well,” Yellen added Tuesday.

The Treasury secretary has for weeks warned House Speaker Nancy Pelosi, D-Calif., and Senate Majority Leader Chuck Schumer, D-N.Y., that the U.S. will no longer be able to honor its debts around Oct. 18. Lawmakers must raise or suspend the debt ceiling before that date or risk the first-ever U.S. default.

While the U.S. has never failed to pay off its bills, economists say a default would spark widespread damage through a jump in interest rates, tarnished faith in Washington’s ability to honest its interest payments on time and potentially delay Social Security payments to some 50 million seniors.

Members of the U.S. armed services could also see their pay delayed as a result of a U.S. default.

“U.S. Treasury securities have long been viewed as the safest asset on the planet,” Yellen said. “That partly accounts for the reserve status of the dollar. And placing that in question by failing to pay any of our bills that come due would really be a catastrophic outcome.”

This is breaking news. Please check back for updates.

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