June 9, 2023

Taylor Daily Press

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What if there is no agreement on the US debt ceiling? “Then a shutdown is very likely,” says economist Eric Joly

In the United States (US), Democrats and Republicans have yet to reach an agreement on raising the debt ceiling. However, time is running out, because default may already be in early June. “A 2011-like government shutdown is a very realistic scenario,” ABN AMRO economist Eric Joly said in a chat with Business AM.

Listen to the full conversation with Eric Jolie below.

In the message: US President Joe Biden returns to the US this weekend after the G7 summit in Japan. In general, visits to Australia and Papua New Guinea were planned but were cancelled. Time is running out for Biden to reach an agreement with Republicans on raising the debt ceiling.

  • “In fact, there was already default on January 19, but the US managed to avoid it using all kinds of techniques. For example, people stopped paying contributions to the pension fund for many government employees,” says Jolie. “Either way, the country will go to normal from June 1 to June 20. .”
  • Economists warn that a 2011-like government shutdown is likely if no agreement is reached on raising the debt ceiling. “If that ceiling is not raised, the US government would have to save $10 billion a day,” he clarifies. “If this continues for two weeks, US GDP will decline by about 0.5 percent.”
    • U.S. Treasury Secretary Janet Yellen warned last week that the U.S. government may not be able to meet some of its fiscal obligations, such as paying social benefits. “That’s something America hasn’t done since 1789. We shouldn’t start it now,” he said in an interview Bloomberg Television.
  • Jolie adds that the situation today is slightly less favorable than it was in 2011: “Republicans and Democrats are now at odds with each other. Both parties want to raise the ceiling, but Democrats don’t want to tie a $3 trillion cut to a debt ceiling increase. According to Republicans, on the other hand, the two things are inextricably linked. So the question is who will make the first offer. Also, we should not forget that both parties are already thinking about the next presidential election,” he said.


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