Sept. 28 (UPI) -- Two top financial officials warned Congress on Tuesday that the U.S. government could run out of money to pay its bills by Oct. 18 if lawmakers fail to raise the debt ceiling.
Federal Reserve Chairman Jerome Powell and Treasury Secretary Janet Yellen warned of a "devastating" impact if the United States defaults on its debt during testimony before the Senate banking committee. They said that any economic recovery from the COVID-19 pandemic could come to a halt.
"It is imperative that Congress address the debt limit," Yellen said. "If not, our current estimate is that treasury will likely exhaust its extraordinary measures by October 18.
"At that point, we expect treasury would be left with very limited resources that would be depleted quickly. America would default for the first time in history. The full faith and credit of the United States would be impaired and our country would likely face a financial crisis and economic recession as a result."
She said the Oct. 18 could change depending on the government's cash flows. Social Security benefits, child tax credits and military pay could all be affected.
"It would be disastrous for the American economy, for global financial markets, and for millions of families and workers," Yellen said.
Powell told senators that although the economy is making positive gains, persistent supply chain issues have helped inflation rise and endure.
"Inflation is elevated and will likely remain so in coming months before moderating," Powell said in his opening statement.
"As the economy continues to reopen and spending rebounds, we are seeing upward pressure on prices, particularly due to supply bottlenecks in some sectors.
"These effects have been larger and longer-lasting than anticipated, but they will abate, and as they do, inflation is expected to drop back toward our longer-run 2% goal."
Powell's Federal Reserve voted last week to leave key interest rates unchanged. The Fed hasn't raised rates since the arrival of the coronavirus pandemic.
Sen. Elizabeth Warren, D-Mass., accused Powell of working to weaken the United States' banking system during his time as head of the Federal Reserve. She said she would vote against him if he's renominated.
"Your record gives me grave concerns," she said. "Over and over, you have acted to make our banking system less safe, and that makes you a dangerous man to head up the Fed, and it's why I will oppose your renomination."
In her testimony, Yellen said the U.S. economic recovery has been "fragile but rapid" -- and is being challenged some by the spread of the Delta coronavirus variant. The more contagious strain has directly led to increased restrictions nationwide that have economic consequences.
"While our economy continues to expand and recapture a substantial share of the jobs lost during 2020, significant challenges from the Delta variant continue to suppress the speed of the recovery and present substantial barriers to a vibrant economy," Yellen said in her opening statement.
"I remain optimistic about the medium-term trajectory of our economy, and I expect we will return to full employment next year. A rebound like this was never a foregone conclusion. In fact, the American recovery is stronger than those of other wealthy nations."
Stubborn inflation has become a talking point among Republicans like Senate GOP leader Mitch McConnell -- and a focus among progressive Democrats who are working on a $3.5 trillion spending package in Congress.