White House economists are warning of “severe damage” to the U.S. economy in the event of a debt default.
FILE - President Joe Biden walks with House Speaker Kevin McCarthy, R-Calif., as he departs the Capitol following the annual St. Patrick's Day gathering, in Washington, Friday, March 17, 2023. Facing the risk of a government default as soon as June 1, President Joe Biden has invited the top four congressional leaders to a White House meeting for talks. – White House economists on Wednesday warned of “severe damage” to the U.S.
House Republicans are insisting on spending cuts as part of any plan to allow the country to resume borrowing. Biden says he will not allow the country to be “taken hostage” by such demands and will only negotiate with the GOP on spending as part of the budgetary process. The president and Democratic lawmakers are seeking a “clean” increase to the nation's $31.4 trillion debt limit.
That statement treats default as solely pertaining to federal borrowing, but administration officials warn that missed payments to contractors, Social Security recipients, federal employees and others would also constitute a default. “Because the government would be unable to enact counter-cyclical measures in a breach-induced recession, there would be limited policy options to help buffer the impact on households and businesses," the White House said."The ability of households and businesses, especially small businesses, to borrow through the private sector to offset this economic pain would also be compromised.”
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