If the United States careened into its first-ever debt default, it would pose a “very serious threat to the global economy,” said British finance minister Jeremy Hunt on Saturday.
Hunt offered his take on the possible outcome of the crisis over the US debt ceiling that overshadowed the latest G7 finance meeting in Japan, telling reporters:
“It would be absolutely devastating if America, which is one of the biggest motors of the global economy, was to have its GDP knocked off track by not reaching agreement.”
Jeremy Hunt faced the media on Saturday ahead of a meeting with the US Treasury Secretary. Janet Yellen had not minced words when she warned earlier that the US, which has been operating under "extraordinary measures" taken up by the department since January, could default on its financial obligations as early as June.
As for the US Treasury chief, she also told journalists on the sidelines of the G7 event that negotiating a debt ceiling raise was, on this occasion, "more difficult, but I'm hopeful that...we will find a solution."
A report by the Congressional Budget Office (CBO) also fed into recent dire forecasts.
“The extent to which the Treasury will be able to fund the government’s ongoing operations will remain uncertain throughout May, even if the Treasury ultimately runs out of funds in early June. That uncertainty exists because the timing and amount of revenue collections and outlays over the intervening weeks could differ from CBO’s projections,” the nonprofit added on Friday.
It did clarify that if the government avoided default by June 15, financing operations could "probably continue" through at least the end of July thanks to “quarterly tax receipts and additional extraordinary measures.”
Last month, Republicans, who wield a narrow majority in the House after the November 2022 midterm elections, passed legislation to raise the debt ceiling tied in with cuts to government spending. However, Joe Biden and Senate Majority Leader Chuck Schumer both rejected the truncated budget measure. Democrats have been calling for raising the debt ceiling without concessions.
A scheduled Friday meeting between the US President and congressional leaders to discuss the debt ceiling and looming default had to be postponed. US House Speaker Kevin McCarthy said the postponement was due to the fact that staff-level talks failed to make any headway in the standoff.