Biden administration warns of catastrophic consequences if US defaults on debt
The United States government is facing a potential economic catastrophe if a debt deal is not reached in the coming days. The possibility of the country’s first-ever default is causing concern, as negotiations between Democrats and Republicans are expected to continue this week. The two parties have been unable to come to an agreement, despite warnings from officials and bankers that such a default could trigger a recession with potentially far-reaching consequences.
At the heart of the issue is the so-called debt ceiling, which determines the country’s borrowing capacity. The current cap stands at US$31.4 trillion, with Congressional Republicans calling for budget cuts in exchange for raising this threshold. Meanwhile, the White House insists that the nation’s credit should not be up for negotiation.
Wally Adeyemo, Deputy Treasury Secretary, explained what could happen if Congress fails to raise the debt limit by the time of default, stating that “we would go into a recession and it’d be catastrophic.” He added, “The United States of America has never defaulted on its debt – and we can’t.” President Joe Biden has expressed his preference for a “clean” debt ceiling hike, which would not involve spending cuts.
Byron Donalds, a Republican representative from Florida, commented, “It’s time to bring spending levels back to pre-Covid, and then we can talk about raising the debt ceiling.” He claimed that if Biden does not bring any propositions to the table, then he is the one responsible for leading the nation into default. This sentiment is shared by former president Donald Trump, who has encouraged Republican lawmakers to push for massive cuts if Biden does not agree to them.
Upcoming negotiations between the president and Republican leaders, including House Speaker Kevin McCarthy, have been postponed for now. Despite the current political deadlock, the White House’s National Economic Council Director, Lael Brainard, assured that a deal would be reached, saying, “Our expectation is that Congress will do what is necessary.” Brainard continued, emphasizing the importance of preventing a potentially disastrous outcome. “There is no reason we shouldn’t raise the debt limit and prevent default in this country, a default that could lead to a massive recession that would cost us millions of jobs.”
Although President Biden acknowledged that progress was being made in the discussions, he admitted that the two sides were “not there yet.” As the nation waits for the outcome of these critical negotiations, the clock continues to tick towards a major economic turning point for the United States, reports Bangkok Post.
