A spokesperson for the International Monetary Fund (IMF) said Friday that a failure by the U.S. to raise its debt ceiling would have “serious repercussions” for the U.S. and global economy.
“The world economy is facing another challenging year. There would be serious repercussions if the U.S. debt ceiling were not increased, both for the U.S. and through negative spillovers to the world economy,” the IMF spokesperson told Reuters. “We strongly encourage the various parties to build the consensus needed to resolve this matter.”
The federal government reached its $31.4 trillion borrowing limit on Thursday, prompting Treasury Secretary Janet Yellen to take what she called “certain extraordinary measures to prevent the United States from defaulting on its obligations.”
Yellen had warned in a letter to Congress those measures would allow the government to buy time so that Congress can negotiate and pass a debt limit increase—but that the purchased time would likely “be exhausted before early June.”
Meanwhile, House Republicans, newly emboldened by their five-seat majority, have been positioning for a standoff. They plan to leverage the need to avoid breaching the debt ceiling to extract major spending cuts, including to safety nets like Social Security and Medicare. House GOP lawmakers insist that past Congresses and Presidential Administrations have spent too much on social programs.
The Biden Administration, though, has said it will not negotiate on the debt ceiling, accusing House Republicans of using it as a “political football.”
On Thursday, Senate Minority Leader Mitch McConnell (R-KY) appeared to side with the Administration, telling reporters in his home state that while the debt ceiling has always been “a rather contentious effort,” he was confident the ceiling would be raised—stressing, “America must never default on its debt. It never has, and it never will.”
While the United States has indeed never defaulted on its debt, it has repeatedly come close, perhaps most notably in 201, amid the rise of the conservative “tea party” movement in the House.
Last Friday Yellen warned that if lawmakers fail to act, not raising the debt ceiling could cause “real harms,” such as, for example, “the only credit rating downgrade in the history of our nation in 2011.”