“We should not think that prioritization is the solution to the debt-ceiling issue — prioritization is simply not paying all of the government’s bills when they come due. That is something we have never done since 1789,” she said in the Republican-controlled House Ways and Means Committee Friday. 

Yellen said it’s critical that the government pay all its bills as they come due. If officials think “there’s some short cut around it that will avoid economic chaos, we’re kidding ourselves. Because not paying the government’s bills will produce economic and financial collapse,” she said in response to a question by Washington Democrat Suzan DelBene.

The Treasury chief’s comments come a day after US President Joe Biden unveiled his $6.9 trillion budget proposal, a defiant opening move in high-stakes negotiations with congressional Republicans over the debt ceiling and government funding. 

In her prepared testimony, she repeated her demand that lawmakers lift the statutory debt limit without conditions and without waiting until the last minute. 

“A default on our debt would trigger an economic and financial catastrophe,” Yellen warned. Republicans have demanded sharp budget cuts in exchange for raising the debt limit.

Her testimony also follows two days of hearings earlier this week with another top economic leader, Federal Reserve Chair Jerome Powell. The central bank has drawn political fire recently, mostly from Democrats, over the economic damage that could result from its aggressive interest-rate increases intended to cool inflation. Republicans, at the same time, have blamed the Biden administration’s pandemic stimulus for fueling the surge in consumer prices.

Yellen singled out bringing down inflation as the administration’s top economic priority. “We have seen some moderation in headline inflation, but more work needs to be done,” she said. 

Yellen’s appearance is the first of several such sessions expected this month on Capitol Hill. A second is scheduled for March 16 before the Senate Finance Committee, while more hearings in the offing. She hasn’t testified before lawmakers since last June, and the reception she receives may be chillier this time, with Republicans now controlling committees in the House of Representatives. 

Biden’s budget, certain to be rejected by the House, showed little inclination for compromise, asking lawmakers to bolster the social safety net through a flurry of new taxes on the wealthy and corporations. 

“Our proposed budget builds on our economic progress by making smart, fiscally responsible investments. These investments would be more than fully paid for by requiring corporations and the wealthiest to pay their fair share,” Yellen told lawmakers, according to the prepared text of her remarks. “Fiscal discipline remains a central priority in our budget,” she added. 

The  budget would increase funding on a bevy of government programs, extending the solvency of Medicare, lowering prescription drug prices, and cutting the deficit by $3 trillion over the next decade. Even so, the deficit in 2024 would increase from $1.6 trillion to $1.8 trillion, and the gross federal debt would swell to $51 trillion after a decade. 

Republicans will also likely laser in on the $80 billion appropriated last year to rebuild and modernize the Internal Revenue Service. Some conservatives have labeled the plan government overreach, while the administration says the money will be used to upgrade technology, improve customer service and crack down on high-income tax avoiders.

Yellen defended the investment, arguing it is already paying off and that taxpayers are getting “drastically improved customer service this year.”

The secretary just returned from a surprise trip to Ukraine, where she sought to show the results of US economic aid to the embattled country, which some Republicans have questioned.