The White House is yet to settle the debt ceiling debate and arrive on an agreement. If a consensus is not reached soon, the US will default on its debt, leading to a catastrophic global financial crisis. If the US defaults, the economy will likely go into recession and millions will lose their jobs.
US President Joe Biden warned on Sunday about the dire consequences if there is no agreement reached regarding the debt ceiling, resulting in the US to default. The negotiation regarding whether to raise the debt ceiling or enforce budget cuts is still not settled. The discussion with the Republicans is expected to continue in the week ahead.
The consequences of the US economy hitting default will be felt globally and would very likely trigger a recession in the United States, which would ultimately lead to millions losing their jobs. The US is predicted to hit its first-ever default by June 1 if no consensus is reached.
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The White House wants a clean-hike in the debt ceiling
The US economy is in shambles right now with the country possibly hitting its debt ceiling by June 1 and resultantly going into recession.
The US President Joe Biden again warned that the consequences of US defaulting would be catastrophic and urged that the congress needs to reach an agreement on raising the debt ceiling.
Joe Biden has continuously stated that he wants a clean hike in the debt ceiling i.e. he wants to raise the debt ceiling in order to avoid hitting default. The White House is adamant that the country’s credit should not be put up for discussion.
The Republican Party on the other hand is demanding that any extension of the US’s borrowing authorities should come with considerable restrictions on the country’s spending.
The republicans are insisting on budget cuts to save the country’s spending rather than solely relying on raising the debt ceiling.
The United States’ current debt ceiling is capped at $31.4 trillion.
Despite multiple warnings from officials, economists, and media of the catastrophic consequences of the US hitting default, the congress is yet to arrive at a consensus.
The exact dates of US defaulting in case of no agreement are uncertain, but all reports point towards US defaulting in June if no consensus is reached regarding raising the debt ceiling.
Catastrophic consequences would lead to millions losing their jobs
The US hitting a default will lead to global catastrophe which will likely push the US economy into recession and lead to millions losing their jobs.
Deputy Treasury Secretary Wally Adeyemo said, “If Congress failed to raise the debt limit by the time of default, we would go into a recession and it’d be catastrophic.”
The US has never hit a default on its debt before and such a scenario will lead to the US finding its way in an unfamiliar scenario.
The government will have to default on its financial obligations, meaning that the government won’t be able to pay salaries of federal employees, veteran’s benefits, and also won’t be able to fund retirement plans and Social Security.
Resultantly, millions of people will lose their jobs because of the government running out of cash to pay their salaries.
The default will not only affect the US but also the global economy since the stability of the global economy relies on the relative stability of the US economy. The Fed will have to further raise the interest rates, which would lead to increased rates on car and home loans.
