Recession, millions of jobs lost if US defaults: Treasury

WASHINGTON: President Joe Biden’s administration again warned Sunday of “catastrophic” consequences for the US economy including huge job losses if the country defaults, as negotiations to forge a debt deal are expected to resume this coming week.

For weeks US policymakers, bankers and the White House have warned that the United States is on the precipice of default, a move that could see the country tumble into unknown territory with drastic consequences, including a looming recession and likely global financial contagion.

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The nonpartisan Congressional Budget Office forecast on Friday that the country could default on its debts by June 15 if lawmakers fail to agree on a deal with Biden to raise current limits on government spending.

“We shouldn’t be here,” Deputy Treasury Secretary Wally Adeyemo said on CNN Sunday talk show “State of the Union,” as he repeated the administration’s call for lawmakers to end the standoff and extend US borrowing authority.

“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 said.

“The United States of America has never defaulted on it’s debt – and we can’t.”

Biden has stated he wants a “clean” hike of the debt ceiling, but Republicans are insisting any extension of the country’s borrowing authority, currently capped at $31.4 trillion, come with substantial curbs on spending attached.

A much-anticipated new round of debt-ceiling talks between Biden and Republican leaders, including House Speaker Kevin McCarthy, were postponed until the coming week.

Adeyemo acknowledged “constructive” staff-level negotiations were progressing, but he pushed back on Republican assertions that Biden does not want to rein in federal spending.

“The president’s laid out a plan that includes $3 trillion in debt relief over 10 years,” Adeyemo said, referring to Biden’s budget request unveiled in March.

Congressional leaders should address ways to hammer out a deal on fiscal policy, “but as we have that conversation, 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,” he said.

Biden addressed the issue Saturday in Delaware, where he talked briefly to reporters.

“They’re moving along,” he said of the talks. But while there was “real discussion,” he added the two sides were “not there yet.”