Yellen: US could default if Congress doesn't act

US Treasury Secretary Janet Yellen has warned that the government could run out of money by October 18, and urged Congress to act to lift the borrowing limit.

Yellen spoke at the Senate banking committee on Tuesday, as the government is unable to issue new bonds after the limit was reinstated in August. Extraordinary measures are being taken to keep funds flowing.

She said, "it is imperative that Congress swiftly addresses the debt limit. If it does not, America would default for the first time in history. The full faith and credit of the United States would be impaired."

Her warning came one day after draft legislation proposed by Senate Democrats aimed at temporarily lifting the debt ceiling for previous government spending was rejected due to opposition by the Republicans.

The confrontation between the two parties stems from the Biden administration's ambitious spending plan.

The budget for the next fiscal year that starts on Friday has not been enacted either, raising concerns over a government shutdown.