U.S. will default on its debt between July and September if Congress doesn’t raise debt ceiling, the Congressional Budget Office has said.
If Congress does not pass a debt ceiling increase before these measures are exhausted, the government will have to delay certain payments, default on its debt, or both, CBO said.
The CBO also revised its projection for the size of the annual federal budget deficit over the next decade. The agency now believes the deficit will total $18.8 trillion over the next 10 years, a figure that is 20% higher than the agency’s estimate last May of $15.7 trillion.
"America has paid all of its bills on time since 1789, and not to do so would produce an economic and financial catastrophe," Yellen said. "Every responsible member of Congress must agree to raise the debt ceiling."
“In the longer term, a default would raise the cost of borrowing into perpetuity. Future investments, including public investments, would become substantially more costly,” she said.
“Household payments on mortgages, auto loans, and credit cards would rise, and American businesses would see credit markets deteriorate," she said. “On top of that, it is unlikely that the federal government would be able to issue payments to millions of Americans, including our military families and seniors who rely on Social Security.”