Washington: Moody’s Analytics, a Financial Service Company, has issued a severe warning that if the US Congress fails to lift the debt ceiling, the US economy will suffer another recession. About 6 million Americans could lose their jobs and suffer a loss of $15 trillion during this period, said Mark Zandi, chief economist at Moody’s Analytics. The US administration could run out of cash in the third or fourth week of next month, Bipartisan Policy Center, a US-based think tank, stated.
Two years ago, then US President Donald Trump had decided to suspend the debt ceiling. The suspension of the debt limit was to expire on July 31. Since August, the US Treasury Department has been working based on emergency measures and special provisions available with them. However, the cash available due to these measures would likely exhaust by mid-October or in the days that follow.
Until then, if no new decision is taken, the Biden administration will run out of funds for further expenses and debt repayments. In addition, the administration has provided an additional $6 trillion of funding through various relief programs to boost the economy in the wake of the coronavirus pandemic. However, the economy has not yet recovered from the pandemic. Against the backdrop, a major upheaval in the economy may occur if the decision on the debt limit is not made. The US Secretary of Treasury, Janet Yellen, has repeatedly written to the US Congress to highlight the issue.
Against this background, the warning issued by a leading financial services company like Moody’s Analytics and the claim made by the think tank is striking. The House of Representatives in the US Congress has approved the decision of raising the debt limit. However, the Republican Senators are likely to oppose it fiercely. The Republican Party has shown intense displeasure against new plans and tax increases introduced by the Biden administration. If the Democrats want to help China by executing their plans, they should do so by raising the debt limit on their own and have the tools to do it, criticised Republican Senator Mitch McConnell.
Against this backdrop, Nancy Pelosi, Speaker of the US House of Representatives, has announced that a poll on a $1 trillion infrastructure bill is due this week. The US Senate has already passed the bill, which is believed to be a part of Biden’s ambitious policy.
The US national debt has ballooned to $28.4 trillion. Combined with other public and private debts, the US debt further rises to $85 trillion. The amount is more than four times the current GDP of the US. Considering the national debt alone, presumably, every citizen of the United States carries a debt of $85,000. Earlier, a political clash in the United States over the debt ceiling had led to a ‘shutdown’ on the US administration.
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