U.S. President Joe Biden has said U.S.’s reputation would be “damaged in the extreme” if the government were unable to pay its bills, insisting a default on the national debt is simply not an option.
Addressing reporters after a meeting with congressional leaders on Tuesday, Biden said the sit-down was “productive,” noting that all sides agreed to find a “path forward to make sure America does not default” on its world-historic debt.
“Our economy would fall into a significant recession. It would devastate retirement accounts, increase borrowing cost,” he said of a potential default, adding that “nearly eight million Americans would lose their jobs” and “our international reputation would be damaged in the extreme.”
Calling the debt “the single most important thing that is on the agenda,” the U.S. president went on to claim that “America is not a deadbeat nation,” arguing that it is the “duty” of Congress to raise the debt ceiling in order to avoid a default.
Biden’s comments came amid fierce debate between the two major parties over the national debt, with Republicans calling for major cuts to federal spending before they will agree to raise the government’s borrowing limit. While the president said he would be willing to discuss the budget, he added he would not do so “under the threat of default.”
During a separate briefing after the meeting with Biden, House Speaker Kevin McCarthy, a Republican, said he “asked the president this simple question: Does he not believe there is any place we could find savings?”
The speaker added that the discussions would continue this week, and that he would meet with Biden again on Friday.
A default on U.S.’s debt would mean the government is unable to meet its outstanding obligations, including welfare payments, interest on the existing debt and even paychecks for members of the military. According to the Congressional Budget Office, federal spending currently exceeds revenues by around $1.4 trillion, a large deficit that will have to be covered by borrowing.
Time is running out for Congress and the White House, however, as the government may be unable to pay its bills as soon as next month should lawmakers fail to strike a deal on the debt limit, which now sits at $31.4 trillion.
U.S. Could Default By Next Month, Warns U.S. Treasury Secretary
An earlier media report said:
U.S. Treasury Secretary Janet Yellen warned on Monday that the federal government could run short of cash to pay its bills as soon as next month without a debt limit increase.
“After reviewing recent federal tax receipts, our best estimate is that we will be unable to continue to satisfy all of the government’s obligations by early June, and potentially as early as June 1, if Congress does not raise or suspend the debt limit before that time,” Yellen wrote in a letter to House and Senate leaders.
She urged congressional leaders “to protect the full faith and credit of the united States by acting as soon as possible.”
Yellen wrote: “We have learned from past debt limit impasses that waiting until last minute to suspend or increase the debt limit can cause serious harm to business and consumer confidence, raise short-term borrowing costs for taxpayers, and negatively impact the credit rating of the united States.”
She cautioned: If Congress fails to increase the debt limit, it would cause severe hardship to American families, harm our global leadership position, and raise questions about our ability to defend our national security interests.”
The U.S. Congressional Budget Office (CBO) also updated its forecast on Monday, warning there was a “significantly greater risk that the Treasury will run out of funds in early June” because of weaker-than-expected tax collections.
The CBO had originally projected that a default could happen between July and September.
The warnings come after a months-long standstill in talks on the matter between the White House and Republicans in Congress.
Yellen has been voicing alarm since January, when the U.S. hit its $31.4 trillion debt ceiling. At the time she notified Congress that the Treasury had begun resorting to “extraordinary measures” to avoid a federal government default.
U.S. Warns Of ‘Economic Catastrophe’
In April, Yellen said, a failure by the U.S. to raise its debt ceiling would lead to an economic and financial crisis in the country.
Yellen has cautioned, urging lawmakers to act and not wait “until the last minute.”
The debt ceiling is the maximum amount the U.S. government is legally authorized to borrow to meet its obligations.
Yellen warned during a meeting with business executives from California that a default would result in job losses and push household payments on mortgages and credit cards higher.
The Treasury secretary insisted it was a “basic responsibility” of Congress to increase or suspend the $31.4 trillion borrowing cap.
She said: “A default on our debt would produce an economic and financial catastrophe. A default would raise the cost of borrowing into perpetuity. Future investments would become substantially more costly.”
According to Yellen, U.S. businesses would face deteriorating credit markets and the government would likely be unable to issue payments to military families and seniors who rely on Social Security.
U.S. Debt Is Unsustainable
U.S. House of Representatives Speaker Kevin McCarthy earlier warned that the U.S. debt is unsustainable and poses a threat to the nation.
In January, the Treasury Department notified Congress of the start of “extraordinary measures” that would allow the government to continue paying its obligations until early June, as the US reached its $31.4 trillion debt limit. Yellen then called on lawmakers to “act promptly” to increase borrowing limits in order to avoid a default.
