Al Drago/Pool/Reuters
- Treasury Secretary Janet Yellen said Thursday she would support ending the debt limit.
- Yellen recently said the government needs to raise the debt ceiling by October 18.
- The House passed a bill to suspend the debt ceiling but the Senate is likely to block it.
- See more stories on Insider's business page.
Amid the ongoing crisis around whether or not the US government will be able to pay its bills in three weeks, Treasury Secretary Janet Yellen said that she would support getting rid of the debt ceiling.
Yellen was asked on Thursday before the House Financial Services Committee if she would support getting rid of the debt ceiling, which sets a hard cap on the amount of money the federal government is allowed to borrow. In short, she said yes, and called the law "very destructive."
Yellen's answer pointed out the fundamental tension between Congress authorizing spending and then needing to separately authorize the borrowing needed to pay for that spending.
"I believe when Congress legislates expenditures and puts in place tax policy that determines taxes, those are the crucial decisions Congress is making," Yellen said. "And if to finance those spending and tax decisions it's necessary to issue additional debt, I believe it's very destructive to put the president and myself, the Treasury secretary, in a situation where we might be unable to pay the bills that result from those past decisions."
Other Treasury secretaries have also advocated for getting rid of the law. Obama Treasury Secretary Tim Geithner said in 2012 – between the two Obama-era debt ceiling fights – that "it would have been time a long time ago to eliminate it." In 2013, The Washington Post assembed a long list of economic and policy luminaries who favored abolishing the debt ceiling, including former Treasury Secretaries Robert Rubin, Larry Summers, and Paul O'Neill.
Yellen said in a letter on Tuesday that the government will run out of money by October 18 if the debt ceiling is not raised or suspended.
"At that point, we expect Treasury would be left with very limited resources that would be depleted quickly. It is uncertain whether we could continue to meet all the nation's commitments after that date," the letter said.
Yellen has previously expressed that not raising the limit could be a serious issue, threatening the US economy and the dollar's global standing.
"I can't think of anything more harmful to the role of the dollar than failing to raise the debt ceiling," Yellen previously said.
The House passed a bill to suspend the debt ceiling and avert a government shutdown, but the Senate blocked it. A separate bill to raise the debt ceiling on its own passed the House Thursday, but that is likely to also be voted down when it reaches the Senate.