[Asia Economy Reporter Kim Suhwan] U.S. President Joe Biden strongly urged Congress to raise the federal government's debt ceiling, warning that a default would "push our economy off a cliff." He also harshly criticized the Republican Party for being "irresponsible" in their lack of cooperation during the debt ceiling negotiations.
On the 4th (local time), two weeks before the federal government default deadline, President Biden stated in a White House speech that the Republican Party is not cooperating with the congressional vote to raise the federal government's debt ceiling, which currently stands at $28.4 trillion, calling it a "reckless and dangerous act."
President Biden further criticized the Republicans, saying, "The Republicans are flaunting their power and obstructing our efforts to prevent a catastrophic situation."
Emergency Measures Expected to Run Out by October 18... Biden Calls Default a Comet Striking Our Economy
Previously, in 2019, both parties agreed to suspend the debt ceiling until the end of July this year.
However, failing to pass follow-up legislation by the deadline, the debt ceiling was reinstated in August. With the federal government debt already reaching the limit, the U.S. government is currently financing through emergency measures. These measures are expected to be exhausted by October 18, increasing the likelihood of a default. In such a case, the government will be unable to issue additional bonds for budget execution and will be unable to pay the necessary funds for various federal pension programs.
In response, the House passed a bill at the end of last month to suspend the debt ceiling until December 16 next year, but it was twice rejected in the Senate due to Republican opposition.
In this context, U.S. Treasury Secretary Janet Yellen warned of an unprecedented federal government default, projecting that all emergency measures will be exhausted by October 18, leading to a default.
President Biden’s direct mention of the debt ceiling issue in his White House speech on that day is interpreted as a serious acknowledgment of the possibility of default.
President Biden emphasized the necessity of raising the debt ceiling, describing a default as a "comet" that would strike the U.S. economy. In his speech, he warned, "(A default) will push our economy off a cliff."
He stressed, "Raising the debt ceiling is not about new spending but about paying off old debts. Raising the debt ceiling is a bipartisan matter," urging Republican participation.
President Biden repeatedly urged the Republicans to stop playing Russian roulette and "vote to end this chaos."
Senate Majority Leader Chuck Schumer of the Democratic Party also called for Republican cooperation, saying, "We cannot wait until October 18. The debt ceiling adjustment bill must reach the president’s desk within this week."
Republicans Say "We Don't Need to Cooperate"... Respond to Biden’s Speech
However, Senate Minority Leader Mitch McConnell of the Republican Party rebutted in an open letter to President Biden, stating, "The Senate Democrats do not need any form of Republican cooperation to pass the debt ceiling increase law."
He argued that Democrats can use the budget reconciliation process, which bypasses the filibuster.
McConnell added, "Our Republicans have warned that if Democrats try to run the government alone, they should also handle the debt ceiling issue on their own."
While the filibuster requires at least 60 votes out of 100 senators to end, the budget reconciliation process only requires 51 votes. Including the Vice President’s tie-breaking vote, the Democrats, who hold a Senate majority, can independently adjust the debt ceiling using this procedure.
However, the Democratic Senate is reserving this procedure for a $4 trillion infrastructure development bill proposed by the Biden administration. Democrats are also concerned that adjusting the debt ceiling through budget reconciliation only allows for raising the limit, not suspending it, which could provide Republicans with political ammunition against Democrats in next year’s midterm elections.
Therefore, Democrats are in urgent need of Republican senators’ cooperation to pass the debt ceiling increase bill.
Experts: "A Last-Minute Deal Will Be Reached, but Political Conflict Will Intensify"
In fact, if a default occurs, it could bring "disastrous consequences" to the U.S. economy, as Treasury Secretary Yellen predicted.
International credit rating agency Moody’s warned last month that without action, U.S. economic activity could shrink by about 4%, 6 million jobs could be lost, and the unemployment rate could approach 9%.
Experts generally expect that the parties will reach a last-minute agreement.
Analysts at Barclays said, "Our experts’ consensus is that a default will not occur. However, political conflicts within Congress have become extremely intense, making the situation more precarious."
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