President Joe Biden’s administration on Sunday again warned of “catastrophic” consequences for the US economy if the country defaults, as negotiations with Republicans on a debt deal are expected to resume in the coming week.
Alarm bells are ringing about the possibility of a first-ever US default, with uncertainty about the actual date when the government will no longer be able to pay its bills.
Congressional Republicans are demanding cuts in exchange for lifting the so-called debt ceiling, while the White House has been urging for months that the country’s credit rating should not be negotiated.
The two sides have remained deadlocked despite weeks of warnings from government officials and bankers that a bankruptcy could have drastic consequences, including a potential recession and likely global financial contagion.
Treasury Secretary Janet Yellen has warned a bankruptcy could occur on June 1, while the nonpartisan Congressional Budget Office predicted the June 15 date on Friday.
“We shouldn’t be here,” Deputy Treasury Secretary Wally Adeyemo said on CNN’s “State of the Union” Sunday.
“If Congress fails to raise the debt limit at the time of default, we would be in a recession and that would be catastrophic,” he warned.
“The United States of America has never defaulted on its debts – and neither can we.”
Biden has stated he wants a “clean” debt ceiling increase, but Republicans are insisting that any expansion of the country’s borrowing power, currently capped at $31.4 trillion, will come with significant spending restrictions .
“It’s time to get spending levels back to pre-Covid levels, and then we can talk about raising the debt ceiling,” Byron Donalds, a Republican representative from Florida, told FOX News on Sunday.
“If Joe Biden doesn’t bring anything to the table, if he just sits there with his hands in his pockets…
Former President Donald Trump has encouraged Republican lawmakers to default if Biden does not agree to “massive budget cuts”.
– ‘Constructive’ negotiations –
A much-anticipated new round of debt ceiling talks between Biden and Republican leaders, including House Speaker Kevin McCarthy, was postponed until next week.
Adeyemo acknowledged that “constructive” negotiations were underway at the staff level while pushing back claims Biden is unwilling to address the mounting US debt.
“The president has laid out a plan that includes $3 trillion in debt relief over 10 years,” Adeyemo said, referring to Biden’s budget request unveiled in March, which included tax increases for the wealthy and corporations.
Congressional leaders should be looking for ways to get to an agreement on fiscal policy, “but as we’re having that conversation, there’s no reason why we shouldn’t raise the debt limit and avoid default in this country, a default that could lead to a massive recession.” that would cost us millions of jobs,” he said.
Lael Brainard, director of the White House National Economic Council, insisted a deal would be reached.
“Our expectation is that Congress will do whatever it takes” to avoid a default, Brainard, a former Vice Chairman of the Federal Reserve, told the CBS Sunday show “Face the Nation.”
Biden addressed the issue Saturday in Delaware, where he spoke briefly to reporters.
“They are moving on,” he said of the talks. But while there was “real discussion”, he added that the two sides “weren’t there yet”.
(Except for the headline, this story has not been edited by NDTV staff and is being published from a syndicated feed.)