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Yellen warns of 'catastrophe' if Congress doesn't handle debt ceiling issue

The Senate voted Thursday to extend the debt limit through early December after a long partisan standoff that almost led to default.

WASHINGTON — Treasury Secretary Janet Yellen said there is an "enormous amount at stake" after the Senate approved only a short-term extension of the debt ceiling, again setting up potential for default in December if Congress is unable to make another deal.

"A failure to raise the debt ceiling would probably cause a recession and could even result in a financial crisis. It would be a catastrophe," Yellen said Sunday on ABC's "This Week."

The Senate last week passed a bill to extend the debt limit through early December, temporarily ending a partisan standoff before the government's deadline of Oct. 18 to avoid a default. The House, which had been scheduled to be out this week, will return Tuesday and is expected to pass the measure.

Yellen laid out the potential consequences of not raising the debt ceiling. Social Security payments would be put at risk for 50 million people, members of the military wouldn't know when or whether they would be paid, and payments for the child tax credit, which 30 million families receive, would be in jeopardy.

The measure needed 60 votes in the Senate, meaning 10 Republican votes were needed to bypass the GOP filibuster to make it to the simple-majority vote on final passage. While those 10 votes were secured, no Republicans joined Democrats in the final vote on passage, signaling that another battle is likely later in the year.

Senate Minority Leader Mitch McConnell, R-Ky., sent a warning Friday to President Joe Biden, saying Republican leaders won't work with Democrats on "any future effort to mitigate the consequences of Democratic mismanagement."

"Your lieutenants on Capitol Hill now have the time they claimed they lacked to address the debt ceiling through standalone reconciliation, and all the tools to do it. They cannot invent another crisis and ask for my help," McConnell said.

Yellen was asked directly what the consequences would be if McConnell keeps his word. She responded: "Well, it's absolutely imperative that we raise the debt ceiling. That's necessary not to fund any new spending programs, but to pay the bills that result from Congress' past decisions."

After it passes the House, the bill would head to Biden, who is expected to sign it. The Senate is on a scheduled recess this week.