Yellen: Federal debt ceiling should be abolished by Congress

With the federal government days away from its first default in U.S. history, Treasury Secretary Janet Yellen argued Thursday that Congress should eliminate the borrowing limit entirely to prevent similar risks in the future.

While testifying before the House Financial Services Committee, Yellen said she would support eliminating the limit through legislation. The Treasury Secretary said the current system is "destructive" and presents a risk to economic stability. 

"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."

MCCONNELL BLOCKS SCHUMER BID TO RAISE DEBT CEILING BY MAJORITY VOTE

Under the existing system, Republicans and Democrats hold regular votes to raise the debt ceiling, clearing the way for the government to cover its outstanding obligations. The current U.S. federal debt is $28.4 trillion.

Republicans have blocked multiple Democrat efforts to raise the debt ceiling this week, with GOP leaders saying they will not cast votes that will facilitate costly progressive-backed social spending programs. 

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Earlier this week, Yellen warned U.S. cash reserves would run out by Oct. 18 without a suspension of the borrowing limit, leaving the government at risk to default on its debts. The Treasury Secretary and other economic officials have warned a failure to raise the debt ceiling could prompt global economic instability and sink the country into a lengthy recession.