Without a debt deal, the White House warns of a “economic catastrophe.”
If the US Congress fails to expand the country’s borrowing limit, President Joe Biden’s administration has warned of a “economic catastrophe.”
Republicans, on the other hand, have stated that they will not support extending the debt ceiling, leaving the majority Democrats to suffer the electoral risks alone.
Without an increase, US Treasury Secretary Janet Yellen has warned that the government will run out of cash to maintain operations and pay its debts by October.
“The United States has never defaulted on its debt. Not even once. “Doing so would almost certainly trigger a historic financial crisis, exacerbating the damage caused by the ongoing public health crisis,” she wrote in a Wall Street Journal piece on Monday.
In politically contentious Washington, the topic has repeatedly been a political football, with Republicans engaged in brinkmanship on many occasions under Democrat Barack Obama’s presidency.
Democrats, on the other hand, backed Republican efforts to extend the debt ceiling for two years under Biden’s predecessor, Donald Trump.
With debt exceeding $28.4 trillion, the debt ceiling was reinstated on August 1, and Treasury is already rearranging federal finances to keep paying obligations.
Republicans use the issue to hammer the ruling party on spending, and the country came dangerously close to defaulting under the Obama administration.
Following the battle in 2011, the US lost its coveted “AAA” debt rating from Standard and Poor’s, sending shockwaves across the financial markets.
Mitch McConnell, the Republican Senate leader, has stated that his party is “unified in opposition to extending the debt ceiling,” but claimed that failing to do so in 2019 would be “a tragedy.”
Even waiting until the last minute, according to Yellen, who spoke with McConnell last week, could result in a cascade of financial disasters, including soaring borrowing rates and 50 million seniors losing government payments.
“There is no valid reason to invite such an outcome, especially not the most usually claimed rationale of economic responsibility,” she said.
The “overwhelming agreement among economists and Treasury officials of both parties is that failing to raise the debt ceiling would result in widespread economic disaster.”
The clash occurs as Democrats attempt to pass two major spending bills: an eight-year, $1.2 trillion infrastructure package and a ten-year, $3.5 trillion package with a slew of social programs, all of which are largely funded by rolling back tax cuts.
With the fiscal year’s conclusion looming, Congress will almost certainly need to pass a temporary financing bill soon. Brief News from Washington Newsday.