Yellen voices support for abolishing debt ceiling, calls it "destructive"

Treasury Secretary Janet Yellen voiced support Thursday for the idea of abolishing the federal debt limit, noting that the arbitrary limit on the country's ability to pay back its financial obligations is "destructive."

Why it matters: The U.S. is just weeks away from defaulting on its loans on Oct. 18 if Congress fails to raise or suspend the debt ceiling by then.

• Yellen has previously warned that the failure of Congress to act in time could "precipitate a historic financial crisis."
• "It would be a catastrophe if Congress failed to raise the debt ceiling," she added Thursday while testifying at a House Financial Services Committee hearing.

What they're saying: “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 is necessary to issue additional debt, I believe it is very destructive to put the president and myself, as Treasury secretary, in a situation where we might be unable to pay the bills that result from those past decisions.”
• Yellen added that she would support proposed legislation that would do away with the national debt ceiling.

Of note: Yellen added that— for the better part of the decades since World War II —both Republican and Democratic administrations have operated in budget deficits, and that taking action on the debt ceiling should be a bipartisan effort.

• "That requires on a regular basis raising the debt ceiling," she added. "The need to do so has nothing to do with future spending or tax plans."