Treasury Secretary Janet Yellen urged Congress on Monday to pass a bipartisan resolution to raise the amount of money the U.S. government can borrow, saying failing to increase the debt ceiling so would "cause irreparable harm" to the economy.
Why it matters: Republican lawmakers, led by Senate Minority Leader Mitch McConnell (R-Ky.), have threatened to refuse to vote for raising the debt ceiling, which came back into force on Aug. 1.
- They've instead called on Democrats to do so in their multitrillion-dollar budget reconciliation package, which can’t be filibustered and requires only a simple majority to pass.
- McConnell told Punchbowl News last month that he "can’t imagine there will be a single Republican voting to raise the debt ceiling" in light of how much Congress has already spent during the pandemic.
How it works: The debt ceiling does not control how much the government spends. That's Congress' responsibility.
- The ceiling only prevents the Treasury from paying off expenses that have already been enacted by Congress, and failure to pay those expenses will result in the government defaulting, which is unthinkable, Axios' Felix Salmon explains.
- Republicans and Democrats worked together to raise the borrowing limit three times throughout the Trump administration and several times in other previous administrations.
Between the lines: Yellen's appeal for a bipartisan approach to raising the debt ceiling is a call against doing so through a Democrat-only reconciliation bill.
What they're saying: "As I said in my letter to Congress on July 23rd, increasing or suspending the debt limit does not increase government spending, nor does it authorize spending for future budget proposals; it simply allows Treasury to pay for previously enacted expenditures," Yellen said in a statement.
- "The vast majority of the debt subject to the debt limit was accrued prior to the Administration taking office. This is a shared responsibility, and I urge Congress to come together on a bipartisan basis as it has in the past to protect the full faith and credit of the United States," she added.
The big picture: Yellen, in a letter to Congress in July, urged members to "protect the full faith and credit of the United States by acting as soon as possible" and said the department will take "extraordinary measures in order to prevent the United States from defaulting on its obligations."
Go deeper:Get ready for more debt ceiling drama