Paul Krugman warns a US debt default would mean economic disaster. Here are 3 things Biden can do if lawmakers fail to strike a deal.
A US default would bring on catastrophic consequences for the economy – but there are three things the Biden administration can do if Congress fails to raise the debt ceiling, according to Nobel laureate Paul Krugman.on Tuesday, with policymakers still at an impasse over whether to raise the US's borrowing limit., Goldman Sachs estimated – an event that would have harrowing implications for the US economy.
, like banning student-loan forgiveness. On Monday, Speaker Kevin McCarthy said the House would vote on a bill to lift the debt ceiling until 2024, though he didn't specify what would be included. "Failing to raise the debt limit would have disastrous consequences," Krugman warned, as US government debt is the linchpin of global financial markets."At minimum, it would disrupt the functioning of the federal government. At worst, it would precipitate a global financial crisis, possibly as bad or worse than the crisis of 2008," he added.
But there are three possible Plan Bs for the Biden administration if Congress can't reach a deal to lift the debt ceiling, Krugman said:the post-Civil War addition to the Constitution ensures equal protection under the law but also says the integrity of the nation's public debts"shall not be questioned.". A $3 trillion platinum coin could be deposited at the Federal Reserve to pay off national debts.
"All of these plans have drawbacks, and considered in isolation they each sound a bit silly. But they should be graded on a curve – compared not with normal fiscal management, but with the catastrophic consequences if the US government simply stops paying its bills," he said."When the party that controls one body of Congress has no interest in keeping America governable, catastrophe is always a real possibility.
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