US Nearing First Default In History; Biden Cancels Australia Trip
By Stefan J. Bos, Chief International Correspondent Worthy News
WASHINGTON (Worthy News) – U.S. President Joe Biden called off a visit to Australia, part of his upcoming Asia trip, to rush back home and help avoid the first default in America’s history.
Biden was still to attend a three-day summit of Group of Seven (G7) leaders starting Friday in Hiroshima, Japan, but will already return to the U.S. on Sunday, the White House confirmed.
He had been scheduled to make a brief, historic stop in Papua New Guinea, then fly to Australia for a meeting of the Japan, Australia, India, and U.S. grouping known as the Quad countries.
The Quad meeting has now been canceled, with leaders to meet instead at the G7, officials said.
Tuesday’s announcement came as President Joe Biden and top Republican lawmakers met at the White House on Tuesday for less than an hour to break a deadlock over raising the whopping $31.4 trillion U.S. debt limit.
While both sides tried to sound optimistic, there were no signs yet they would agree on raising the federal debt ceiling by June 1, without Republican conditions being fulfilled.
If the emerging deadline is missed, the U.S. Treasury could run out of money to pay the government’s bills, including for federal and military employees, tax refunds, and Social Security payments to millions of pensioners.
FIRST EVER DEFAULT
It would result in a first-ever default that could trigger a devastating recession here and have worldwide implications, warned U.S. leaders.
U.S. Treasury Secretary Janet Yellen said Tuesday that “a US default would generate an economic and financial catastrophe.”
And White House National Security Council spokesman John Kirby said: “There are countries like Russia and China that would love nothing more than for us to default.
Yet U.S. House of Representatives Speaker Kevin McCarthy, a Republican, told reporters the two sides are still far apart
Republicans are ready to increase the debt limit by a maximum of $1.5 trillion.
In exchange, they demand reduced funding for federal agencies to 2022 fiscal year levels and limit spending growth to 1 percent annually over the next 10 years
Republican lawmakers argued this would lead to $4.8 trillion in savings. The plan would end several of Biden’s legislative priorities, including student loan forgiveness.
MORE CUTS
Besides spending cuts, Republicans seek stricter work requirements for federal aid programs.
A proposal, passed in the House, would require able-bodied adults younger than 55 to work a minimum of 20 hours each week to get food stamps beyond three months.
The proposals are opposed by most Democrats backing President Biden, who runs for re-election in 2024 in a race when he may face his predecessor Donald J. Trump.
The tensions are part of a broader debate about U.S. borrowing costs that friends and foes agree are spiraling out of control, impacting generations.
The U.S. debt ceiling has been raised, extended, or revised 78 times since 1960, according to official records.
The last time the U.S. was approaching a default in 2011, lawmakers struck a deal hours before the deadline.
Yet lawmakers likely recall that the standoff led to a downgrade in the U.S. credit rating, sent the stock market plummeting, and increased the government’s borrowing costs.
“Nobody should use default as a hostage,” said U.S. Senate Majority Leader Chuck Schumer, a Democrat. “The consequences would be devastating for America.”
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