The debate in Washington about increasing the US government’s borrowing limit of $31.4 trillion is causing concerns for the global economy. A recent report released by Congress, which was unbiased in its findings, warned of a high chance of a historic default occurring in the first half of June. The reports published on Friday by the Washington Congressional Budget Office (CBO) confirmed the warnings of Treasury Secretary Janet Yallen. The secretary warned that default could come even on 1 of June. The CBO alerted that from any day in the first two weeks of June, the US government will no longer be able to pay even for essentials.
Congress budget scorekeeper said that even if treasury would run out in June, there would always be continued uncertainty throughout May. Since the start of the year, President Biden and his Democratic Congressional colleagues have been urging to timely increase the $31.4 trillion government borrowing limit without any conditions attached. The House of Representatives, which Republicans narrowly control, requests to devise new spending limits before approving additional payments for borrowing related to previously approved spending.
US Economic Fall Has Global Impacts
At a meeting of the Group of Seven (G7) finance representatives, the President of World Bak, David Malpass, expressed that default risks are very high and would be the first in American history. He further said the US default would have global impacts and slow the economy. Malpass added the world’s largest economy’s disaster would negatively impact everyone. President Biden is scheduled for a meeting of G7 leaders next week in Niigata, japan. But Biden said he might cancel the session if he and congressional leaders fail to achieve some goals regarding an increase in the debt limit.
The possibility of defaulting on debts has caused worry among investors on Wall Street. This situation was reflected in a fall in US stock prices. Household sentiment data indicate that people are increasingly anxious about the circumstances. President Biden tweeted on Friday and referred to Former US President Trump about his campaign of Make America Great Again. Biden said the supporters of Trump’s movement in the House have threatened to default on American debt unless their demands are fulfilled. American leader further said Republicans might cut the budget for thousands of jobs, firefighters, and even for National Park rangers.
Anthony D’Esposito, the representative of Republicans, responded to Biden’s talk and asked him to stop lying. He added Mr. President has refused to make negotiations with Republicans properly. Biden and his administration constantly cautioned about the catastrophic default. They warned that American Bonds are crucial to the global economy and that US default would trigger the downfall of the global financial system.
Talks to resolve the matter
The spokesperson to the White House, Karine Jean-Pierre, said that staff-level meetings among US officials are being conducted which proved productive, but she didn’t provide any specific details. She added that there would be talks throughout the week, which were in the right direction and would be fruitful.
President Biden has a planned meeting with Democratic and Republican Congressional leaders this Friday but has postponed it for some day next week. The conference is delayed as both sides struggle to see what could be cut in the 2024 budget. The effects of the deadlock in Washington are now being felt beyond the capital. The University of Michigan’s bi-monthly consumer sentiment report, released on Friday, revealed that households now have a negative view of the economy. The sentiment is the lowest it has been in six months.
Yellen urged the leaders of Wall Street and business owners to raise the point of how talks on debt limits have been impacting the economy and causing severe uncertainty. She hoped for the resolution of debt limit problems. Treasure Secretary further advised discussing the matter with leading bankers.