Senate Republicans were in disarray earlier as they struggled to come up with enough support to clear an initial procedural vote.
Reconciliation is seemingly the only way Democrats can raise the debt ceiling. The GOP is aiming to jam up the process to derail Biden's agenda.
"It is a potentially catastrophic event," he told Reuters. "Every single time this comes up, it gets fixed, but we should never even get this close."
US economic strength rests on trust in the dollar. A debt-ceiling breach would destroy that, Yellen said, with big implications for every country.
Democrats say that in refusing to agree to a debt ceiling increase, Republicans are refusing to pay bills racked up during the Trump admin.