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America will hit its borrowing limit today, raising economic concerns

by SuperiorInvest

Gregory Daco, chief economist at EY Parthenon, estimated this week that without raising or suspending the debt ceiling until emergency measures are exhausted, economic output in the United States could fall by 5 percent. Such a contraction would deal a major blow to the economy, which is expected to grow modestly this year.

“Treasury would need to balance the federal budget by ensuring that government spending equals government revenue,” Mr. Daco said, predicting that such a scenario would lead to “recession itself” and the risk of “severe financial market dislocation.”

Ms. Yellen dismissed ideas of unilaterally lifting the borrowing ceiling, such as minting $1 trillion, as fanciful.

Some veterans of debt-limit battles predict that as X-date approaches, enough Republicans will back away from the brink of default.

“While nobody really knows what would happen when you go over the debt limit, few would speculate that good things would happen,” said Christopher Campbell, who served as assistant secretary of the Treasury for financial institutions from 2017 to 2018. a cascade of how bad it gets.”

Mr. Campbell, a former staff director for Senate Finance Committee Republicans, added: “At the end of the day, I think cooler heads are going to have to prevail.”

But White House officials have privately begun exploring alternative paths to raising the limit, including maneuvers — which could take months — to force a vote to raise the debt ceiling with largely Democratic support. They did not express confidence that Republicans would bend in the negotiations, although they have repeatedly said they expect Congress to repeal the cap.

Ms. Jean-Pierre reiterated Wednesday that Mr. Biden would not negotiate to raise the debt limit. Asked if she believed Republicans saw it as their responsibility to raise the cap and avoid default, she said, “They should.”

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