CONGRESSIONAL impasse over debt ceiling raises concerns over the economy of the United States and global financial stability.
In the midst of negotiations between President Joe Biden‘s administration and Congressional Republicans over the looming US debt default, concerns over the potentially catastrophic consequences for the economy continue to escalate.
The White House has warned of dire outcomes if the debt ceiling is not raised, while Republicans insist on budget cuts as a condition for extending the country’s borrowing authority.
In light of this, Treasury Secretary Janet Yellen has issued a warning that a default could occur as early as June 1, while the Congressional Budget Office predicts the date to be around June 15.
“Earlier this month I told the U.S Congress that our best estimate is that the United States government will be unable to continue to satisfy all of its obligations by early June and potentially as early as June 1 if Congress does not address the debt limit before that time. That projection underscores the urgent need for Congress to act as soon as possible in my assessment and that if economists across the board default on U.S obligations would produce an economic and financial catastrophe. Millions of Americans could lose their jobs household incomes would be reduced American businesses would see credit markets deteriorate and millions of American families that receive government payments would likely be left without the resources that they were promised this would make it dramatically harder for households to spend and businesses to invest a default would threaten the gains that we’ve worked so hard to make over the past few years in our pandemic recovery,” said Janet Yellen, U.S. Secretary of the Treasury.
Deputy Treasury Secretary Wally Adeyemo stressed the urgency of the situation, stating,
“If Congress failed to raise the debt limit by the time of default, we would go into a recession, and it’d be catastrophic. The United States of America has never defaulted on its debt — and we can’t.”
President Biden has advocated for a “clean” hike of the debt ceiling, free from conditions, while Republicans are demanding substantial spending cuts in exchange for lifting the borrowing limit, which is currently set at $31.4 trillion.
Biden added that default is not an option.
“The United States is not going to default. Never has and it never will.”
“I made clear during our meeting that default is not an option repeat at that time and again America is not a deadbeat Nation. We pay our bills and avoiding default is a basic duty of the United States Congress,” said President Joe Biden, United States of America.
Meanwhile, negotiations between President Biden and Republican leaders, including House Speaker Kevin McCarthy, were postponed until the coming week. Adeyemo acknowledged ongoing “constructive” negotiations at the staff level and clarified that Biden’s plan includes $3 trillion in debt relief over ten years.
Lael Brainard, director of the White House’s National Economic Council, expressed confidence that a deal would be reached, stating, “Our expectation is that Congress will do what is necessary” to avoid a default.
While progress is being made, President Biden noted on Saturday that the negotiations are not yet at a resolution. The urgency to find a solution remains high, as failure to raise the debt ceiling could have severe repercussions for the US economy and global financial stability.
