Debt talks are due to start this week with US President Joe Biden and Republicans.
According to a US Treasury Department official, if the US defaults on its debt by June 15, it would face a catastrophic recession that would destroy millions of jobs.
The dire warning was made on Sunday by Deputy Treasury Secretary Wally Adeyemo, as debt talks are due to start this week. His comments echoed previous warnings issued by US politicians, bankers, and the White House that the country is on the brink of default.
According to them, a default would have severe ramifications for the country, including a coming recession and possible worldwide financial contagion.
US President Joe Biden remained unclear about his talks with Republicans on raising the debt ceiling, telling his press pool on Saturday they were “moving along” but are “not there yet.”
On Friday, the impartial Congressional Budget Office predicted that the United States would default on its obligations by June 15 if legislators failed to reach an agreement with President Joe Biden to lift current expenditure caps.
“We shouldn’t be here,” Adeyemo told CNN, echoing the Biden administration’s plea for legislators to resolve the deadlock and extend US borrowing power.
“If Congress failed to raise the debt limit by the time of default, we would go into a recession and it’d be catastrophic,” he explained, adding, “The United States of America has never defaulted on it’s debt — and we can’t.”
Fresh talks pushed until next week
Biden favors a “clean” debt-ceiling increase, but Republicans demand that any expansion of the country’s borrowing ability, which is presently set at $31.4 trillion, comes with significant spending cuts.
A fresh round of debt-ceiling negotiations between Biden and Republican leaders, including House Speaker Kevin McCarthy, has been pushed out until next week.
Adeyemo said congressional leaders should discuss methods to reach a fiscal policy agreement, adding, “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 that would cost us millions of jobs.”
On Thursday, US Treasury Secretary Janet Yellen warned that pursuing a political policy of standing on the edge of the abyss over the US debt ceiling crisis might lead to “serious economic costs” even without a default.
Last week, Yellen warned Congress through ABC News that failing to resolve the debt ceiling issue on their part might create a “constitutional crisis” and send out a ripple effect across the financial markets.
Biden said on Tuesday that he might not attend the G7 summit for presidents next week if the debt ceiling issue is not resolved by then.
On January 19, the United States reached its borrowing limit. The Treasury Secretary cautioned on May 2 that if Congress fails to extend or suspend the debt ceiling, the US might run out of money as soon as June 1.
This article was originally published by Al Mayadeen English.