As talks with Republicans on a debt agreement are anticipated to restart in the next week, President Joe Biden’s administration issued a fresh warning on Sunday of “catastrophic” repercussions for the US economy if the country fails.
Alarms are going out about the potential for the first-ever US default, but it’s unclear exactly when the government would cease being able to pay its debts.
The so-called debt limit is being demanded by congressional Republicans in return for budget concessions, despite months of White House insistence that the country’s credit should not be up to discussion.
Despite weeks of warnings from government officials and bankers that a default could have grave repercussions, including a probable recession and likely global financial contagion, the two sides have not made any progress.
The independent Congressional Budget Office predicted on Friday that the deadline would be June 15. Treasury Secretary Janet Yellen has warned that a default may happen by June 1.
Wally Adeyemo, the deputy Treasury secretary, said on CNN’s “State of the Union” on Sunday, “We shouldn’t be here.”
He cautioned that it would be disastrous if Congress did not increase the debt ceiling before the country defaulted.
“The United States of America can’t default on its debt because it has never done so.”
While Republicans demand that any increase in the nation’s borrowing ability, which is presently restricted at $31.4 trillion, come with significant expenditure cuts, Biden has emphasized that he wants a “clean” increase in the debt ceiling.
Rep. Byron Donalds, a Republican from Florida, told FOX News on Sunday, “It’s time to bring spending levels back to pre-Covid, and then we can talk about raising the debt ceiling.”
“Joe Biden is the one driving our country into default if he brings nothing to the table and just sits there with his hands in his pockets.”
Donald Trump, the former president, has urged Republican senators to push for a default if Biden won’t accept “massive cuts.”
‘Constructive’ negotiations
Biden and Republican leaders, including House Speaker Kevin McCarthy, postponed a highly anticipated fresh round of debt-ceiling negotiations until the next week.
Adeyemo denied claims that Biden does not want to confront the spiraling US debt while acknowledging that “constructive” discussions are still taking place at the staff level.
Adeyemo referred to Biden’s budget proposal, which was published in March and included tax hikes on the rich and companies, and stated that the president “has laid out a plan that includes $3 trillion in debt relief over 10 years.”
“But as we have that conversation, 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 and cost us millions of jobs,” he said. Congressional leaders should discuss ways to reach a fiscal policy agreement.
The National Economic Council’s Lael Brainard insisted that a compromise would be achieved.
A former vice chair of the Federal Reserve, Brainard said on the CBS Sunday program “Face the Nation” that “our expectation is that Congress will do what is necessary” to prevent a default.
In a short conversation with reporters, Biden addressed the matter on Saturday in Delaware.
He remarked of the negotiations, “They’re going along. However, he said that despite “real discussion,” the two sides were “not there yet.”
