The clash between President Joe Biden and House Majority Leader Kevin McCarthy over the US debt will decide who is the most dominant figure in Washington for most of the next two years. And a failure by the two men to come to terms by this time next month would result in a national default that could have a profound impact on the economy and the 2024 election.
While the gravest human impact of a default would be felt by millions of Americans in lost jobs, benefits and an eroded sense of economic security, the showdown is also about power.
The huge stakes explain why a meeting between Biden, McCarthy and other top congressional leaders in the Oval Office on Tuesday is so critical and will be watched worldwide.
It represents a fateful moment in the apparently tense and shallow relationship between the two most powerful people in Washington and will help define a period of bitterly divided government in the capital. Can a Democratic president and a Republican who leads what’s perhaps the most radical House majority ever navigate a solution that satisfies both their incompatible political positions? Or is this disconnect destined to deeply harm the country?
The consequences of a default on US debt – which could happen as soon as June 1 if Congress doesn’t agree to lift the government’s borrowing authority – would be disastrous. The government would have to choose which bills to pay – for instance, between the interest on the national debt or the benefits on which millions of Americans rely. Markets could plunge, a recession could occur and unemployment could rocket. A default would permanently raise US borrowing rates.
“We just wouldn’t have enough money to pay the bills. And I think it’s widely agreed that this would be a huge hit to the economy and really an economic catastrophe,” Treasury Secretary Janet Yellen told CNBC on Monday.
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