The US economy could be headed for a crisis manufactured by a handful of House Republicans.
The treasury secretary, Janet Yellen, informed congressional leaders on Thursday that the US has hit its debt ceiling, which limits the amount of money that the government can borrow to pay all of its bills. Yellen urged Congress to work as quickly as possible to raise the debt ceiling and prevent the US from defaulting on any of its financial obligations, which would have catastrophic consequences.
The US has never failed to raise or suspend its debt ceiling, so most Americans are probably unfamiliar with the potential consequences of a default. Experts fear that the crisis would force the treasury to essentially choose which of its creditors to pay, and those decisions would carry legal ramifications while financially harming any number of institutions that rely on government funding.
A failure to address the debt ceiling would simultaneously cause irreparable damage to the reputation of the US treasury, and that recalculation would trickle down to consumers.
The standoff ended with the passage of the Budget Control Act, which raised the debt ceiling and outlined significant cuts in government spending. Some House Republicans now appear to be hoping for similar spending cuts in exchange for a debt ceiling hike, escalating the risk of a default.
Gray was as a policy adviser to former Republican senator Rob Portman when the 2011 crisis unfolded, and he expressed concern that the next debt ceiling fight could bring the US economy even closer to calamity.
McCarthy has indicated his interest in negotiating with the White House over a debt ceiling bill, downplaying concerns over a potential default.
So far, Joe Biden has shown no willingness to entertain the idea of cutting government spending in exchange for raising the debt ceiling.
As of now, it remains unclear how the latest debt ceiling standoff will resolve itself. The White House and the holdout Republican lawmakers have only reiterated their demands, and the clock is ticking to avoid severe economic tumult that could be felt worldwide.
