The two sides remain at a standoff despite weeks of warnings.
Washington:
President Joe Biden’s administration again warned on Sunday of “catastrophic” consequences for the US economy if the country defaults, as talks with Republicans on a debt deal are expected to resume in the coming week.
For the first time alarm bells are ringing over the possibility of a US default, with uncertainty over the actual date the government will stop being able to pay its bills.
Congressional Republicans are demanding budget cuts in exchange for lifting the so-called debt ceiling, while the White House has been insisting for months that the nation’s credit should not be up for negotiation.
The two sides remain at an impasse despite weeks of warnings from government officials and bankers that a default could bring dire consequences, including a possible recession and possible global financial crisis.
Treasury Secretary Janet Yellen has warned that a default could happen by June 1, while the nonpartisan Congressional Budget Office projected a June 15 date on Friday.
“We shouldn’t be here,” Deputy Treasury Secretary Wally Adimoh said Sunday on CNN’s “State of the Union.”
He warned, “If Congress fails to raise the debt limit by the time it defaults, we will go into recession and that will be catastrophic.”
“The United States has never defaulted on its debt – and we can’t.”
Biden has said he wants a “clean” increase in the debt ceiling, but Republicans are pushing any expansion of the nation’s borrowing authority, currently capped at $31.4 trillion, as a substantial curb on spending.
“It’s time to get spending levels back to pre-Covid, and then we can talk about raising the debt ceiling,” Representative Byron Donalds, a Republican from Florida, told Fox News on Sunday.
“If Joe Biden doesn’t bring anything to the table, if he sits with his hands in his pockets … he’s leading our country into default.”
Former President Donald Trump has encouraged Republican lawmakers to stay out by default if Biden does not agree to “massive cuts”.
– ‘Constructive’ talks –
A highly anticipated new round of debt-limit talks between Biden and Republican leaders, including House Speaker Kevin McCarthy, has been postponed until next week.
Adeyemo acknowledged that “constructive” talks were underway at the staff level, while emphasizing that Biden did not seek to address the ballooning US debt.
“The president 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 that included tax increases on the wealthy and businesses.
Congressional leaders must address ways to strike a deal on fiscal policy, “but as we have the conversation, there’s no reason why we shouldn’t raise the debt ceiling and prevent default in this country, a default.” Which could lead to a massive recession that would cost us millions of jobs,” he said.
Lael Brainard, director of the White House’s National Economic Council, said a deal would be reached.
“Our expectation is that Congress will do what is necessary” to avoid a default, Brainard, a former Federal Reserve vice chairman, told the CBS Sunday show “Face the Nation.”
Biden addressed the issue on Saturday in Delaware, where he spoke briefly to reporters.
“They’re moving along,” he said of the talks. But while there were “real discussions”, he said the two sides “were not there yet.”
(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)