“The United States is not a deadbeat nation; we pay our bills,” US president Joe Biden has said in advance of crucial talks with congressional leaders this week about raising the country’s debt ceiling.
The new negotiations come as the White House has warned that any US debt default – caused by a standoff with Republicans who control the House of Representatives – would have catastrophic consequences for the economy.
The president and his Democratic Party wants to see Congress raise the official debt limit but have signalled openness to talk on budgetary plans after that. Mr Biden has insisted the debt ceiling and the budget are totally different issues.
Republicans in the House of Representatives have passed a bill that would raise the debt limit in return for significant spending cuts. Republican House speaker Kevin McCarthy has repeatedly urged Mr Biden to come to the negotiating table.
Romantasy, QuitTok and other words from a dystopia-coded year
Have Ireland’s data centre builders shot themselves in the foot through their own greed?
The old order of globalisation may be collapsing – and bringing Germany with it
Wonderwallets: the cost of everything in 2024, from Oasis tickets to Leinster House bike shelter
Mr McCarthy will be one of the key congressional leaders to meet the president this week.
Mr Biden has accused Republicans of “holding the debt hostage”. Republicans have contended that spending cuts are necessary to curb the inflation and to put the country’s finances on a more sustainable path.
The president has repeatedly highlighted that, under his administration, the country’s federal deficit has fallen. However, there is still a gap between government spending and revenue, and this will need to be funded by increased borrowing.
At present, the US government is limited by law to borrowing no more than $31.4 trillion (€28.5 trillion). The US is coming perilously close to reaching that limit. In a letter to congress last week, treasury secretary Janet Yellen warned the US might not be in a position to pay its bills from as early as the beginning of June.
Democrats and the White House have argued that Republicans were offering the country two “terrible choices” – either legislation that would result in devastating cuts or an enormously damaging debt default.
The Republican bill would raise the debt ceiling into next year in exchange for freezing spending at 2022 levels for a decade as well as rolling back parts of Mr Biden’s landmark health, climate and tax reforms, imposing work requirements on social programmes and expanding mining and fossil fuel production.
Mr Biden said on Friday the Republican plan would put 21 million people at risk of losing Medicaid and see a reduction of 28,000 personnel in law enforcement as well as cutting 100,000 teachers and support staff.
The White House council of economic advisers last week argued that a doomsday scenario of a protracted default would result in another “great recession” which could see 8.3 million people lose their jobs and the stock market fall by 45 per cent. It warned a brief default could lead to 500,000 job losses while even letting the forthcoming talks drift on to the brink could see unemployment rise by 200,000.
[ The Irish Times view on the national debt: Ireland’s financial icebergOpens in new window ]
On Friday Mr Biden described McCarthy as “an honest man” but suggested that he had “sold away everything” to a far-right group in his parliamentary party. He maintained the debt ceiling issue was “a manufactured crisis”.
The president said that at the talks this week he would “reiterate to congressional leaders that they should do what every other Congress has done. That is: Pass the debt limit. Avoid default.”
