US Experts to QNA: Constructive Handling of Debt Ceiling Crisis Help US Avoid Economic Problems (corrected repeat)

The issue of raising the US debt ceiling has drawn wide attention, along with US public opinion in recent days as observers and economists are anticipating the results of the latest developments in this file to figure out whether the US would be able to avoid a financial setback or face overwhelming challenges in the upcoming months as the US approaches a momentous period to overcome vexing financial challenges.

Speaking to QNA, the Head of the economics department at Guilford College, North Carolina, Michael Deitch, said although there was a debate between the White House and the Congress concerning the US debt file, however, the pace of standoff and tensions this year went beyond all expectations. He pointed out that congressional Republicans are seeking to link their consensus on raising the debt ceiling with reductions in government expenditure. In addition, republicans are calling for reducing public expenditure by roughly USD 130 billion, specifying a ceiling for public expenditure equivalent to 2022 levels, Deitch outlined.

He added that they have set three conditions, including amending the ratification mechanism of energy projects, tightening requirements for benefit recipients, and restoring unspent funds that were previously allocated for containment of COVID-19 fallout, however, the Democratic Party rebuffed the proposals and demanded approval to raise the general debt ceiling without preconditions, he said.

Regarding future concerns at homeland, the US economist Gerald Dillard told QNA that the persistent stalemate could mount the risk of the US defaulting debt on time, outlining that such an issue raises concerns and questions about the potential impacts on the global economic stability and the strength of US dollar as a global currency.

For his part, Executive Vice President and Director of Studies at Peterson Institute for International Economics, Marcus Noland, told QNA that debt default in the US implies lower US treasury rates, rising interest rates, dollar devaluation, and the upsurge in fluctuations. He added that debt default is likely to be associated with a reduction in the US stock market with increased pressure on US banking and real estate sectors.

Meanwhile, Professor of Law at Indiana University Bloomington Dean Lueck said in his statements to QNA that the possibility of debt default in the US will remain low, pointing out that such a progressed stage of standoff and debate over US debt ceiling and brinksmanship triggered resentments and concerns in domestic and international financial markets.

If the debt ceiling issue is not approached well in the upcoming days, high trust in the US government bonds will be affected through time and the US economy and dollar will be exposed to fluctuation, he added.

US President Joe Biden and the Republican Kevin McCarthy have reached an agreement, in principle, on raising the US debt ceiling. The agreement represents a breakthrough following prolonged negotiations between the two sides before the set deadline to reach an agreement on Jun. 5, 2023, as specified by the US Department of the Treasury.

Speaker of the US House of Representatives, Kevin McCarthy, said an initial agreement was reached on raising the US debt ceiling, pointing out that the agreement includes landmark reductions in expenditure, while multiple sources familiar with the negotiations confirmed that the White House and Republicans reached an agreement, in principle, on a deal to raise the debt ceiling and maximum threshold of expenditure.

Source: Qatar News Agency