In a bid to ensure that the US doesn't default on its debt commitment, the White House on Tuesday insisted that the looming debt ceiling crisis be handled without conditions and there is no room for negotiations on this.
“This should not be political brinkmanship. We should be dealing with the debt ceiling without conditions. It is important. We're not going to work our way around this; we're not going to negotiate on this. This is the basic duty of Congress,” said White House Press Secretary Karine Jean-Pierre, reported news agency PTI.
In the last administration, the Democrats and Republicans managed to deal with the debt limit three times. “Let’s not forget that,” she noted. Last week, Treasury Secretary Janet Yellen raised concerns about an imminent debt crisis in a letter to Congress. If the issue is not handled on time owing to the differences between the ruling Democrats and the opposition Republicans, who enjoy a majority in the House of Representatives, it might result in the United States defaulting on its debt commitment, which has never happened in the past.
What's the debt limit ceiling?
On its part, Republicans have been insisting on not raising the debt limit which currently is $31.381 trillion as approved by Congress last month. This debt limit is the total amount of money that the US government is authorized to borrow to meet its existing legal obligations. The limit is scheduled to reach its statutory threshold on January 19.
The default would most likely rattle markets and carry big risks, no matter how the Federal Reserve and Treasury try to curb the fallout, warned The New York Times.
Yellen asserted in the letter that it is “critical that Congress act in a timely manner to increase or suspend the debt limit”. Failure to meet the government’s obligations would cause irreparable harm to the US economy, the livelihoods of all Americans, and global financial stability, she further cautioned.
Indian American Congressman Raja Krishnamoorthi, who is a Democrat, has been calling for an increase in the debt limit. “If we don’t raise the debt ceiling, we’ll go into default, and only one default is enough to nuke the economy,” he said.
Republican Congressman Ralph Norman, who is against any rise in the debt limit said $31.4 trillion, is a massive amount of debt. “The government owes this money because politicians in Washington simply will not stop spending. This has been the case for decades, and Republicans are just as much to blame as Democrats,” he said.
“We’ll have to see how negotiations play out, but the bottom line is this: Republicans need to see some degree of incremental spending cuts in these debt ceiling negotiations. An agreement without some reasonable cuts is unacceptable,” Norman said.
“Our national debt is approaching a level not just harmful to economic growth and irresponsible to future generations, but dangerous to our national security today. We are entering treacherous waters and must couple any debt ceiling increases with real reforms,” said Congresswoman Victoria Spartz.
“Huge amounts of politically directed spending and crony capitalism have created a significant oligopoly problem in nearly every market sector - not much different from oligarchs ruling in post-socialist countries,” she said.
Senate Majority Leader Chuck Schumer and House Democratic Leader Hakeem Jeffries in a joint statement said that Congress must act on legislation to prevent a disastrous default, meet America’s your obligations and protect its full faith and credit.