United States against default

 

U.S. politics is at a crossroads due to the power struggle between Democratic and Republican leaders over the debt limit. President Biden is meeting with Republican leaders to find a solution to avoid dire consequences for the world's largest economy.

 

Raising the debt limit is a common practice, but in recent years, Republicans have demanded budget cuts and fiscal deficit reduction as a condition for authorizing more borrowing by the federal government. The lack of agreement led to the U.S. losing its coveted AAA debt rating in 2011, and this year, Republicans have refused to raise the debt limit unless Democrats agree to drastic budget cuts.

 

Treasury Secretary Janet Yellen has warned that if Congress does not resolve the issue quickly, "financial and economic chaos would ensue." Biden has demanded a "clean" debt limit hike arguing that deficit spending has already been approved by Congress and is therefore not up for debate.

 

Although the dispute is expected to be resolved, financial markets are certain of a negative reaction if lawmakers allow the deadline to arrive, which could lead to massive sell-offs in equity markets and have other negative consequences. Analysts warn that congressmen may be willing to risk something unprecedented to achieve their goals.

 

In short, the power struggle between Democratic and Republican leaders over the debt limit is endangering the world's largest economy. President Biden is meeting with Republican leaders to find a solution, but negotiations could be difficult and the consequences of a possible failure are uncertain and worrisome for financial markets.