Treasury official: Recession looming, millions of jobs to be lost if US defaults on debt

A US Treasury Department official says the country is in for a massive recession that would cost millions of jobs if it defaults on its debts by June 15.

The bleak warning was issued on Sunday by Deputy Treasury Secretary Wally Adeyemo, as negotiations to forge a debt deal are expected to resume this coming week.

His remarks echoed similar warnings by US policymakers, bankers and the White House that the country is on the precipice of default. They say a default could lead to drastic consequences for the country, including a looming recession and likely global financial contagion.

On Friday, the nonpartisan Congressional Budget Office forecast that the US could default on its debts by June 15 if lawmakers failed to agree on a deal with President Joe Biden to raise current limits on government spending.

Debt ceiling worries deepen as early June US default reinforced

The Washington standoff over raising the US government

"We shouldn't be here," Adeyemo said in an interview with CNN, repeating the Biden administration's call for lawmakers to end the standoff and extend US borrowing authority.

"If Congress failed to raise the debt limit by the time of default, we would go into a recession and it'd be catastrophic," the Treasury official said, adding, "The United States of America has never defaulted on it's debt -- and we can't."

Biden says he wants a "clean" hike of the debt ceiling, but Republicans insist that any extension of the country's borrowing authority, currently capped at $31.4 trillion, comes with substantial curbs on spending.

A new round of debt-ceiling talks between Biden and Republican leaders, including House Speaker Kevin McCarthy, has been postponed until the coming week.

Congressional leaders should address ways to hammer out a deal on fiscal policy, Adeyemo said, adding, "There is no reason we shouldn't raise the debt limit and prevent default in this country; a default that could lead to a massive recession that would cost us millions of jobs."

On Thursday, US Treasury Secretary Janet Yellen called on Congress to raise the federal debt limit and avert an unprecedented default that would trigger a global economic crisis.

“A default would threaten the gains that we’ve worked so hard to make over the past few years in our pandemic recovery. And it would spark a global downturn that would set us back much further,” she said.

Yellen warns US debt default would trigger global economic crisis

US Treasury Secretary Janet Yellen has called on Congress to raise the $31.4 trillion federal debt limit and avert an unprecedented default that would trigger a global economic crisis.

Yellen added, “It would also risk undermining US global economic leadership and raise questions about our ability to defend our national security interests.”

The United States hit its borrowing limit on January 19. Treasury Secretary on May 2 warned that the US may run out of money as early as June 1, if Congress fails to raise or suspend the debt limit.

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