Negotiations between President Joe Biden’s administration and Republicans over a debt deal are expected to resume this week. If a deal is not reached, there are concerns about the US economy defaulting, which could lead to catastrophic consequences. Congressional Republicans want budget cuts in exchange for lifting the debt ceiling, while the White House insists that the nation’s credit should not be up for negotiation. The two sides have remained at an impasse, despite warnings from government officials and bankers that a default could lead to a recession and global financial contagion.
Treasury Secretary Janet Yellen has warned that a default could occur by June 1, while the nonpartisan Congressional Budget Office forecasted June 15. Deputy Treasury Secretary Wally Adeyemo has cautioned that if Congress fails to raise the debt limit by the time of default, it would lead to a recession and catastrophic consequences.
Biden wants a clean hike of the debt ceiling, but Republicans are insisting on substantial curbs on spending. Negotiations between Biden and Republican leaders have been postponed until this week, but Adeyemo has acknowledged that constructive negotiations are ongoing at the staff level. A deal needs to be reached to avoid a default that could lead to a recession and cost millions of jobs.