Critical meeting over debt ceiling ends with no deal
A critical meeting between President Biden and top congressional leaders on the U.S.
debt ceiling ended with no deal on Tuesday.
The United States is facing a potential crisis as it is on track to run out of borrowing power in June if Congress fails to come up with a solution.
The implications of this deadlock could affect every American, according to a former federal economist.
The meeting at the White House lasted over an hour, with President Biden emphasizing that default is not an option.
He stated that if the U.S.
does not raise the debt limit, it will run out of funds and discussions will need to focus on what expenses can be cut and how to reduce the deficit.
However, the immediate priority is to remove the threat of default from the table.
House Speaker Kevin McCarthy expressed dissatisfaction with the lack of progress in the meeting and mentioned that further discussions will continue.
The responsibility to resolve this issue lies with the President and the Speaker of the House.
The U.S.
currently has a debt limit of $31.4 trillion, but this is set to run out in June.
The potential consequences of reaching the debt ceiling are significant.
Former Federal Reserve economist and UC Berkeley finance professor Jim Wilcox explained that if the U.S.
hits the ceiling, tough decisions will have to be made regarding who gets paid.
This includes payments to government employees, military personnel, social security and welfare recipients, and government contractors.
The ripple effect of delayed payments would be felt throughout the economy, impacting consumer spending and potentially affecting bonds, money market funds, and retirement accounts.
Wilcox also warned that a failure to address the debt ceiling issue promptly could harm the U.S.
credit rating worldwide and make borrowing more expensive in the future.
He drew parallels to mortgage payments, suggesting that a history of missed payments would result in higher interest rates for individuals, businesses, and governments alike.
Following the meeting, President Biden did not rule out a short-term increase in the debt ceiling until September 30th.
The staff continues to work towards finding a resolution, with hopes of another meeting in the near future.
The absence of a deal from the critical meeting raises concerns about the economic stability of the United States.
As the deadline approaches, the pressure intensifies for lawmakers to reach an agreement and ensure the financial well-being of the nation.
