Our Standard of Living is at Risk

The stalemate over raising the federal debt limit remains unresolved following a meeting between President Biden and House Speaker Kevin McCarthy.

  • Some House Republicans seem to underestimate the gravity of a sovereign default, which could potentially undermine the dollar’s status as the global reserve currency.

Why it matters: The implications of such a default could be severe, possibly triggering a recession, inflation, and financial market instability.

  • A default could also jeopardize the U.S.’s global economic standing, with international investors potentially turning to other currencies.
  • Given the current global context of the pandemic and geopolitical tensions, the fallout from a default in 2023 could be particularly severe.

Despite the risks, House Republicans remain unmoved, maintaining their commitment to spending cuts and opposition to much of Biden’s agenda.

  • Amid these threats, constitutional experts are urging Biden to invoke the 14th Amendment to mandate the Treasury to pay legal debts, thereby avoiding default.
  • However, the President’s advisers are divided on this course of action.

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