The administration of President Joe Biden warned again on Sunday of the “catastrophic” consequences that await the American economy in the event of a default on government bonds. The Treasury has identified the loss of millions of jobs and a possible global financial crisis among the likely risks.
Debt negotiations are expected to resume next week.
For weeks, American politicians, bankers and the White House have been warning that the United States is on the verge of default. This could lead to the country collapsing and facing serious consequences, including a recession, and the world is likely to face a global financial crisis.
The Congressional Budget Office predicted on Friday that the country could default on its debt by June 15 if lawmakers fail to broker a deal with Biden to raise current limits on government spending.
Deputy Treasury Secretary Wally Adeyemo reiterated the administration’s call for lawmakers to end the impasse and expand the government’s borrowing power on CNN on Sunday.
“If Congress fails to raise the default debt ceiling, we will enter a recession and it will be a disaster,” he said. “The United States of America has never defaulted on its debt – and we can’t (do that).”
Biden has said he wants an unconditional increase in the debt ceiling, but Republicans insist that the expansion of borrowing power, currently capped at $31.4 trillion, be accompanied by deep spending cuts.
A long-awaited new round of debt ceiling talks between Biden and Republican leaders, including House Speaker Kevin McCarthy, has been postponed until next week.
Adeyemo acknowledged that “constructive” talks at the administration and congressional level are progressing. At the same time, he dismissed Republican claims that Biden did not want to cut federal spending.
“The president has presented a plan that includes $3 trillion in debt relief over 10 years,” Adeyemo said, referring to Biden’s budget request released in March.
Congressional leaders need to find ways to reach an agreement on fiscal policy, “but while we’re having this conversation, there’s no reason why we shouldn’t raise the debt ceiling and prevent the country to default, a default that could lead to a massive recession that will cost us millions of jobs,” he said.
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