POST Online Media Lite Edition



 

U.S. moving closer to debt default, Biden warns

Christian Fernsby |
President Joe Biden said on Monday the federal government could breach its US$28.4 trillion debt limit in a historic default unless Republicans join Democrats in voting to raise it in the two next weeks.

Article continues below




Senate Republicans, led by Minority Leader Mitch McConnell, have twice in recent weeks blocked action to raise the debt ceiling - saying they do want action but will not help. Republicans say Democrats can use a parliamentary manoeuvre known as budget reconciliation to act alone. Top Democrats have rejected that approach.

"Raising the debt limit comes down to paying what we already owe ... not anything new," Biden told reporters at a White House news conference.

Asked if he could guarantee the United States won't breach the debt limit, the president answered: "No I can't. That's up to Mitch McConnell." He said he intended to speak with McConnell about the matter.

In a high-stakes standoff over parliamentary maneuvers. McConnell for months has been saying that Democrats should use a process called "budget reconciliation" to get around the Senate's filibuster rule, which requires 60 of 100 members to agree to pass most legislation. Senate Majority Leader Chuck Schumer, a Democrat, has rejected that approach and Biden on Monday pleaded not to use the filibuster to block action.

"Just get out of the way," Biden told Republicans. "If you don't want to help save the country, get out of the way so you don't destroy it."

Late last month the US House of Representatives passed and sent to the Senate a bill to suspend the limit on Treasury borrowing through the end of 2022. Schumer was expected to hold a vote on that measure this week.

Treasury Secretary Janet Yellen last week warned lawmakers that the United States government was close to exhausting its federal borrowing capabilities by about October 18.

Failure to act could have catastrophic economic consequences. Moody's last month warned that it could cause a nearly 4% decline in economic activity, the loss of almost 6 million jobs, an unemployment rate of close to 9 percent, a sell-off in stocks that could wipe out US$15 trillion in household wealth and a spike in interest rates on mortgages, consumer loans and business debts.

Biden blamed the “reckless tax and spending policies” of the previous Trump administration for the need to raise the debt limit, noting that the United States racked up nearly US$8 trillion in new debt over four years, more than one quarter of the entire debt outstanding.


What to read next

McConnell: The Kremlin is not our friend
Biden says COVID-19 vaccines will be widely available by the end of July
Biden tells Europe 'America is back'