The countdown toward a possible U.S. government default began Thursday with Treasury implementing accounting measures as a stopgap, while frictions between President Joe Biden and House Republicans raise alarms about whether the U.S. can sidestep a potential economic crisis.
The Treasury Department said in a letter to congressional leaders it has started taking “extraordinary measures” as the government has run up against its legal borrowing capacity of $31.381 trillion. An artificially imposed cap, the debt ceiling has been increased roughly 80 times since the 1960s.
Those differences increase the risk that the government could default on its obligations for political reasons. That could rattle financial markets and plunge the world's largest economy into a wholly preventable recession. Asked twice on Wednesday if there was evidence that House Republicans can ensure that the government would avert a default, White House press secretary Karine Jean-Pierre said it's their “constitutional responsibility” to protect the full faith and credit of the United States. She did not say whether the White House saw signs at this stage that a default was off the table.McCarthy said Biden needs to recognize the political realities that come with a divided government.
“There should be no political brinkmanship with the debt limit,” said Senate Majority Leader Chuck Schumer, D-N.Y. “It's reckless for Speaker McCarthy and MAGA Republicans to try and use the full faith and credit of the United States as a political bargaining chip.” Analysts at Bank of America cautioned in a report last week that “there is a high degree of uncertainty about the speed and magnitude of the damage the U.S. economy would incur.”
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