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Treasury Secretary Janet Yellen in Brussels in July. Photo: John Thys/AFP via Getty Images

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 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 she's 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 her July 23 letter to Congress, 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

Go deeper

Sep 20, 2021 - Politics & Policy

Democrats propose raising debt ceiling through midterms

Speaker of the House Nancy Pelosi and Senate Majority Leader Chuck Schumer. Photo: Stefani Reynolds/Bloomberg via Getty Images

House and Senate leadership announced on Monday that they plan to attach a proposal to raise the debt ceiling through Dec. 2022 to a short-term, government funding bill. The bill must pass before the end of the month or Congress risks a shutdown.

Why it matters: Democrats are taking a huge risk by trying to force through an increase of the debt limit in its must-pass funding bill. The move is wishful thinking on behalf of Democrats who are hoping they can get at least 10 centrist Republicans to balk, as well as an effort to put Republicans on record opposing it.

Sep 20, 2021 - Politics & Policy

Yellen: U.S. would be "permanently weaker" if debt limit not raised

Treasury Secretary Janet Yellen speaks during an event Wednesday in Washington, D.C. Photo: Drew Angerer/Getty Images

Treasury Secretary Janet Yellen warned in a Wall Street Journal op-ed on Sunday that the U.S. could face a fresh financial crisis if Congress failed to raise or suspend the country's debt ceiling.

Why it matters: The U.S. has never defaulted on its debt, but some Republican lawmakers have threatened to vote against raising the debt ceiling, arguing that it would only promote more government spending.

Wall Street's wobble disrupts record stock market boom

People walk by the New York Stock Exchange earlier this month. Photo: Spencer Platt/Getty Images

Monday interrupted a stretch of calm amid the historic stock market boom underway since March 2020.

Driving the news: Jitters were apparent nearly everywhere.