The US government has a track record of promptly paying its bills. But a lot of people are concerned about what would happen if the United States stopped making payments on its debt to lenders. To default is to disregard a legal or regulatory requirement. It denotes the inability or unwillingness to repay loans in the financial world. According to Mark Zandi, “no corner of the global economy will be spared” if the U.S. government defaulted and the issue was not resolved right away. He serves as head economist for risk advisory company Moody’s Analytics.
According to the Associated Press, Zandi and two colleagues proposed that 1.5 million jobs might be lost in the United States even if the country did not make payments on its debt for a little week. According to Zandi’s team’s calculations, 7.8 million jobs may be lost if the default continued into the summer. Furthermore, they calculate that a sharp decline in the stock market would result in a $10 trillion decline in household wealth. The quantity of debt securities the government is allowed to retain at any given time is limited by US law, which is the reason why default is a topic of discussion. We refer to it as the national debt limit.
Democratic President Joe Biden and Republican House Speaker Kevin McCarthy have been holding meetings to talk about the issue. On Monday, the two got together. Republicans want to restrict future government spending and roll back expenditure growth. The president wants them to raise the debt limit, and in exchange they have promised to do so. Since 1960, Congress has increased, altered, or prolonged the borrowing cap 78 times, with the most recent one occurring in 2021. The U.S. Treasury sells bonds and other securities to investors, allowing the government to borrow money from both domestic and foreign sources.
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