US President Joe Biden has warned that a failure to extend the government’s borrowing authority could set off a global financial crisis.
It comes as Mr Biden is escalating his campaign to get Congress to lift the federal debt limit amid indications Democrats may change senate filibuster rules to get around Republican opposition.
Mr Biden yesterday hosted a number of CEOs – including the heads of banks such as Citi, JP Morgan Chase and Bank of America – to underscore the severe ramifications if the government runs out of money to cover its bills.
Ahead of the meeting, the White House yesterday warned that if the borrowing limit is not extended, it could set off a global financial crisis that the US may not be able to manage.
“A default would send shock waves through global financial markets and would likely cause credit markets worldwide to freeze up and stock markets to plunge,” the White House Council of Economic Advisers said in a new report. “Employers around the world would likely have to begin laying off workers.”
The recession that could be triggered could be worse than the 2008 financial crisis because it would come as so many nations are still struggling with the Covid-19 pandemic, the report said. It was first obtained by The New York Times.
Congress has only days to act before the October 18 deadline when the Treasury Department has warned it will run short of funds to handle the nation’s already accrued debt load.
The Senate, meanwhile, was yesterday due to vote on whether to take up a bill to suspend the debt limit, but Republicans are again expected to block it.
To get around the GOP standoff, Mr Biden indicated in off-the-cuff comments that Democrats are weighing a procedural change. “It’s a real possibility,” he told reporters outside the White House.
Getting rid of the filibuster rule would lower the typical 60-vote threshold for passage to 50.
In the split 50-50 Senate, US vice-president Kamala Harris can break a tie, allowing Democrats to push past Republicans.
The filibuster has been up for debate all year, as Mr Biden and his allies consider ways to work around GOP opposition to much of his agenda.