Post by Admin on Sept 18, 2021 21:39:28 GMT
White House warns of an economic recession if the debt ceiling is hit
A 'manufactured' economic recession could plunge the United States into chaos and result in 'millions of jobs lost' if Congress doesn't take action on the debt ceiling, the White House warned Friday.
'Hitting the debt ceiling could cause a recession. Economic growth would falter, unemployment would rise, and the labor market could lose millions of jobs,' a new White House fact sheet reads.
Failing to raise or suspend the country's borrowing limit would hinder the country's recovery from the heavy toll the COVID pandemic took on the hospitality and travel industries, resulting in millions of Americans losing employment.
'The U.S. economy has just begun to recover from the pandemic and a manufactured debt ceiling crisis would threaten the gains we’ve made and the future recovery. If the U.S. defaults on its obligations, the ripple effects will hurt cities and states across the country,' the White House said.
Congress missed a deadline to raise or suspend the debt ceiling in July 2021, forcing the Treasury into extraordinary measures to keep the government funded.
When House lawmakers return next week they will look at suspending the debt limit, according to a letter from Majority Leader Steny Hoyer to House colleagues
'Hitting the debt ceiling could cause a recession. Economic growth would falter, unemployment would rise, and the labor market could lose millions of jobs,' a new White House fact sheet reads.
Failing to raise or suspend the country's borrowing limit would hinder the country's recovery from the heavy toll the COVID pandemic took on the hospitality and travel industries, resulting in millions of Americans losing employment.
'The U.S. economy has just begun to recover from the pandemic and a manufactured debt ceiling crisis would threaten the gains we’ve made and the future recovery. If the U.S. defaults on its obligations, the ripple effects will hurt cities and states across the country,' the White House said.
Congress missed a deadline to raise or suspend the debt ceiling in July 2021, forcing the Treasury into extraordinary measures to keep the government funded.
When House lawmakers return next week they will look at suspending the debt limit, according to a letter from Majority Leader Steny Hoyer to House colleagues
Hoyer privately told Democrats they're looking at a potential extension to keep the government open from September 30 through December 10, Politico reported late last week.
Treasury Secretary Yellen warned lawmakers multiple times that those measures will run out sometime in October.
Among the federal programs that could stop seeing cash flow when the measures dry up are FEMA and Medicaid.
Money given to states by the government to pay for disaster relief efforts, school lunches and infrastructure dollars for public transit and highways could all be halted.
More than $10 billion allocated to states for public health measures also hangs in the balance, at a time when some states' hospital systems are once again buckling under the strain of new COVID cases.
A lack of action on the debt ceiling would also prevent the federal government from mitigating the worst effects of a potential recession.
The White House points out that if nothing is done states and cities would face a 'double-whammy' between falling consumer income and spending brought on by a recession, and no federal aid to make up for some of the loss.
Treasury Secretary Yellen warned lawmakers multiple times that those measures will run out sometime in October.
Among the federal programs that could stop seeing cash flow when the measures dry up are FEMA and Medicaid.
Money given to states by the government to pay for disaster relief efforts, school lunches and infrastructure dollars for public transit and highways could all be halted.
More than $10 billion allocated to states for public health measures also hangs in the balance, at a time when some states' hospital systems are once again buckling under the strain of new COVID cases.
A lack of action on the debt ceiling would also prevent the federal government from mitigating the worst effects of a potential recession.
The White House points out that if nothing is done states and cities would face a 'double-whammy' between falling consumer income and spending brought on by a recession, and no federal aid to make up for some of the loss.
'This means critical state services will be at risk for budget cuts, from education to healthcare to pensions.'
Raising or suspending the debt ceiling doesn't authorize new spending, the White House points out. Rather it gives the government room to pay for obligations that Congress and both President Biden and former President Trump already approved.
The line is a direct answer to Republicans' defense that they refuse to raise the debt limit to pay for Democrats' spending.
Speaker Nancy Pelosi previously hit back at the accusation, claiming last week the limit needs to be raised to 'pay off the Trump credit card' for the $7 trillion debt the ex-president accrued for the US.
Senate Minority Leader Mitch McConnell refused to budge on the debt ceiling after Treasury Secretary Janet Yellen called him on Wednesday to implore the Kentucky Republican to take action before the United States runs out of cash and defaults on its debts.
McConnell demanded that Democrats navigate the federal debt limit without Republican support, deepening the emerging standoff in Congress over how to boost the government's borrowing authority.
Raising or suspending the debt ceiling doesn't authorize new spending, the White House points out. Rather it gives the government room to pay for obligations that Congress and both President Biden and former President Trump already approved.
The line is a direct answer to Republicans' defense that they refuse to raise the debt limit to pay for Democrats' spending.
Speaker Nancy Pelosi previously hit back at the accusation, claiming last week the limit needs to be raised to 'pay off the Trump credit card' for the $7 trillion debt the ex-president accrued for the US.
Senate Minority Leader Mitch McConnell refused to budge on the debt ceiling after Treasury Secretary Janet Yellen called him on Wednesday to implore the Kentucky Republican to take action before the United States runs out of cash and defaults on its debts.
McConnell demanded that Democrats navigate the federal debt limit without Republican support, deepening the emerging standoff in Congress over how to boost the government's borrowing authority.
During the Wednesday phone call McConnell reiterated the GOP's position that they will not partner with Democrats to lift the cap on federal debt, which now stands at $28.4 trillion.
The leader repeated to Secretary Yellen what he has said publicly since July: This is a unified Democrat government, engaging in a partisan reckless tax and spending spree,' McConnell spokesman Doug Andres said Thursday.
'They will have to raise the debt ceiling on their own and they have the tools to do it.'
Forced to push through the unpopular debt limit increase with no sign of GOP help, the White House blasted Republicans in a statement Thursday evening following a readout of President Joe Biden's meeting with House Speaker Nancy Pelosi and Senate Majority Leader Charles Schumer.
'They also discussed plans for moving forward to ensure that the full faith and credit of the United States is not in doubt, and to pass a continuing resolution to fund government operations,' according to the readout of the talks.
'These are bipartisan responsibilities, especially given that a substantial debt was run up during the previous administration in pursuit of COVID relief and other measures, that received bipartisan support. Any suggestion by Republicans that they will shirk their responsibility is indefensible,' it said.
'They will have to raise the debt ceiling on their own and they have the tools to do it.'
Forced to push through the unpopular debt limit increase with no sign of GOP help, the White House blasted Republicans in a statement Thursday evening following a readout of President Joe Biden's meeting with House Speaker Nancy Pelosi and Senate Majority Leader Charles Schumer.
'They also discussed plans for moving forward to ensure that the full faith and credit of the United States is not in doubt, and to pass a continuing resolution to fund government operations,' according to the readout of the talks.
'These are bipartisan responsibilities, especially given that a substantial debt was run up during the previous administration in pursuit of COVID relief and other measures, that received bipartisan support. Any suggestion by Republicans that they will shirk their responsibility is indefensible,' it said.
The dueling statements are a sign of the return of tense potential government shutdowns and stand-offs over a potential default, a regular feature of the Obama administration when the GOP seized control of Congress.
Biden, Pelosi and Schumer also reaffirmed Thursday that 'it is only fair that we pay for these tax cuts and investments by repealing the Trump tax giveaways to the wealthiest Americans and big corporations, who often pay little to nothing in taxes.'
In the Friday release, White House officials pointed out the volatility US financial markets saw the last time the debt ceiling came close to being breached - noting that the S&P 500 fell by 17 percent in the months approaching the critical threshold.
Pelosi last week shut down the possibility of raising the debt limit through Democrats' $3.5 trillion reconciliation infrastructure package – which would have it move with all Democratic votes.
Congressional leaders are already struggling to find unity among Democrats to get the package through the House and the 50-50 Senate.
A Treasury Department official said Yellen is resolving to continue talks.
'Secretary Yellen will continue to talk to Republicans and Democrats about the critical need to swiftly address the debt ceiling in a bipartisan manner, to avoid the catastrophic economic consequences of default,' Principal deputy assistant secretary Lily Adams told Punchbowl News.
Biden, Pelosi and Schumer also reaffirmed Thursday that 'it is only fair that we pay for these tax cuts and investments by repealing the Trump tax giveaways to the wealthiest Americans and big corporations, who often pay little to nothing in taxes.'
In the Friday release, White House officials pointed out the volatility US financial markets saw the last time the debt ceiling came close to being breached - noting that the S&P 500 fell by 17 percent in the months approaching the critical threshold.
Pelosi last week shut down the possibility of raising the debt limit through Democrats' $3.5 trillion reconciliation infrastructure package – which would have it move with all Democratic votes.
Congressional leaders are already struggling to find unity among Democrats to get the package through the House and the 50-50 Senate.
A Treasury Department official said Yellen is resolving to continue talks.
'Secretary Yellen will continue to talk to Republicans and Democrats about the critical need to swiftly address the debt ceiling in a bipartisan manner, to avoid the catastrophic economic consequences of default,' Principal deputy assistant secretary Lily Adams told Punchbowl News.
That means lawmakers only have a few weeks to reach a compromise over the federal government's debt limit before the Treasury is forced to delay or miss payments.
Former President Trump suspended the debt ceiling for two years when he was in the White House, and Congress missed a July 2021 deadline to raise or suspend it again.
The Treasury was forced into what Yellen calls 'extraordinary measures' to keep up payments.
Yellen has sent multiple letters to lawmakers urging them to take action, warning that those measures will likely run out in October.
Should the country run out of money without a new limit in place, the Treasury would be unable to pay for expenses with anything other than tax revenue.
That won't be enough to cover the vast number of national financial obligations - which include paychecks for federal employees, federal pensions for former workers and for veterans, funding government agencies and money for foreign lenders, among others.
In her latest letter to lawmakers on September 8 Yellen highlighted that the US has never in history failed to meet its financial obligations.
'A delay that calls into question the federal government's ability to meet all its obligations would likely cause irreparable damage to the U.S. economy and global financial markets,' Yellen wrote.
'At a time when American families, communities, and businesses are still suffering from the effects of the ongoing global pandemic, it would be particularly irresponsible to put the full faith and credit of the United States at risk.'
Senate Republicans still insist that the majority pass legislation without their help that would include an increase or suspension of the debt limit - but Democrats note that on three occasions during Trump´s presidency, they worked with a Republican-controlled Senate and White House to suspend the borrowing limit.
They are insisting that Republicans reciprocate and share in what can be a politically unpopular vote that allows the government to not only promptly pay its bills but also to take on more debt.
'Senators from both parties overwhelmingly voted in support of the many laws that contributed to this obligation,' said Senate Majority Leader Chuck Schumer. 'So neither party can wash its hands of responsibility to pay the bills.'
The debt limit caps the amount of money Treasury can borrow to keep the government running. When it was suspended for two years in July 2019, the public debt subject to the limit stood at $22 trillion. It now stands at $28.4 trillion.
An Associated Press analysis of data from the US Treasury shows that nearly 98 percent of the nation's $28.4 trillion debt predates Biden´s inauguration in January. That includes about $7.8 trillion heaped onto the pile during Trump´s four-year presidency.
Former President Trump suspended the debt ceiling for two years when he was in the White House, and Congress missed a July 2021 deadline to raise or suspend it again.
The Treasury was forced into what Yellen calls 'extraordinary measures' to keep up payments.
Yellen has sent multiple letters to lawmakers urging them to take action, warning that those measures will likely run out in October.
Should the country run out of money without a new limit in place, the Treasury would be unable to pay for expenses with anything other than tax revenue.
That won't be enough to cover the vast number of national financial obligations - which include paychecks for federal employees, federal pensions for former workers and for veterans, funding government agencies and money for foreign lenders, among others.
In her latest letter to lawmakers on September 8 Yellen highlighted that the US has never in history failed to meet its financial obligations.
'A delay that calls into question the federal government's ability to meet all its obligations would likely cause irreparable damage to the U.S. economy and global financial markets,' Yellen wrote.
'At a time when American families, communities, and businesses are still suffering from the effects of the ongoing global pandemic, it would be particularly irresponsible to put the full faith and credit of the United States at risk.'
Senate Republicans still insist that the majority pass legislation without their help that would include an increase or suspension of the debt limit - but Democrats note that on three occasions during Trump´s presidency, they worked with a Republican-controlled Senate and White House to suspend the borrowing limit.
They are insisting that Republicans reciprocate and share in what can be a politically unpopular vote that allows the government to not only promptly pay its bills but also to take on more debt.
'Senators from both parties overwhelmingly voted in support of the many laws that contributed to this obligation,' said Senate Majority Leader Chuck Schumer. 'So neither party can wash its hands of responsibility to pay the bills.'
The debt limit caps the amount of money Treasury can borrow to keep the government running. When it was suspended for two years in July 2019, the public debt subject to the limit stood at $22 trillion. It now stands at $28.4 trillion.
An Associated Press analysis of data from the US Treasury shows that nearly 98 percent of the nation's $28.4 trillion debt predates Biden´s inauguration in January. That includes about $7.8 trillion heaped onto the pile during Trump´s four-year presidency.
