Biden assures no US default as debt ceiling deadline looms

US President Joe Biden has reassured the nation that there will be no default on the country’s debt, even as lawmakers went on a 10-day break without reaching an agreement on raising the borrowing limit. The government estimates it could run out of money to service its debts by June 1, and failure to repay loans could potentially lead to a recession and impact global markets. However, House Republicans are demanding up to US$130 billion in cuts and spending caps for 2022 in exchange for their votes to raise the borrowing limit.

“There will be no default,” Biden said at the White House, adding that his negotiations with Republican Speaker Kevin McCarthy had been “productive”. However, Democratic minority leader Hakeem Jeffries criticised the Republicans for leaving Washington and risking default in a crisis they had created.

Economists have warned of the potential economic catastrophe if the government defaults and top military officials have also expressed concerns about the crisis having a “significant negative impact” on troops. McCarthy has said lawmakers will receive 24 hours notice if they need to return for a vote during the recess, and negotiators are reportedly closing the gap on their differences.

Raising the permitted national debt level has no implications for future spending; it simply enables the government to make repayments on loans that have already been approved and carried out. Deputy Treasury Secretary Wally Adeyemo described the default threat as a “manufactured crisis” that is already making borrowing more expensive and costing Americans money, reports Channel News Asia.