US President Joe Biden has issued a warning that the entire world would face significant consequences if the US defaults on its debt. Speaking at a program in New York, Biden stated that global leaders are closely monitoring the situation. He described the debt limit crisis as a “manufactured crisis” in the strongest economy in the world. Biden urged responsible spending cuts and deficit reduction without triggering an unnecessary crisis.
The US federal government has already hit the $31.4 trillion debt limit, which could result in a default. The debt limit means the upper limit on the amount the government can take out to pay off its outstanding debts. Republicans are pushing for significant spending cuts, while Democrats want to increase the debt limit and oppose any Republican proposals to cut specific spending.
Biden also highlighted the potential consequences of a default, including higher interest rates for credit cards, car loans, and mortgages, as well as delaying social security payments and job losses. Those outcomes could lead to an economic recession, damaging the country’s international reputation.
The situation is concerning both parties as they remain in a deadlock. As talks continue, they risk shaking the markets, with uncertainty increasing the possibility of a recession. Biden met with Democrat and Republican leaders yesterday to come up with a solution to the crisis. He stated that the meeting was productive, and they would convene again on Friday to discuss the issue.