US Treasury Secretary Janet Yellen has warned that a default on government debt could trigger a recession that destroys many American jobs and businesses.
Yellen addressed an event organized by a group of community financial institutions on Tuesday.
She noted that a default would likely cause benefits from the federal government to go unpaid, including those to Social Security beneficiaries, veterans and military families.
She said, "the resulting income shock could lead to a recession that destroys many American jobs and businesses."
Yellen called the US Treasury market the "bedrock of the global financial system," and said "the world has never doubted that America will pay the principal and interest on its bonds in full and on time."
She said, "A default would crack open the foundations upon which our financial system is built," and that a number of financial markets could break, causing "worldwide panic."
Yellen noted that the United States avoided a default at the last minute in 2011, but that "eleventh-hour brinkmanship" led to the first-ever downgrade of the US credit rating in history.
She strongly urged Congress to take action as soon as possible.