what did biden say
At the G7 gathering in Hiroshima, the United States president asked reporters to settle down as questions turned toward a possible debt default. While speaking with Australian Prime Minister Anthony Albanese, Biden urged the press to pause, saying, “Calm down, okay? Thank you.” The moment captured the tension between rapid questions and the need for a clear reply.
He also faced inquiries about the debt limit and offered a measured explanation of his negotiations with Republican lawmakers. Biden described himself as steady throughout the talks and noted that when initial discussions produced little progress, subsequent talks yielded progress. He emphasized that resolving the debt question remains a top priority and asserted confidence in steering the country away from default, adding, “I still believe we can avoid default and do something right.”
What Happens to the U.S. National Debt?
The United States reached the debt ceiling of 31.4 trillion dollars on January 19 of the year, prompting action to be taken through extraordinary measures. Since the spring began, Janet Yellen has cautioned Congress that Treasury funds could run out by June 1, 2023, underscoring looming timing concerns.
The situation has roots in the political stalemate over raising the public debt limit. While the need for new borrowing persists to fund the government, the country has continued to attract buyers for its bonds, reflecting strong international demand for U.S. credit.
Some Republicans backed a plan to raise the debt ceiling by 1.5 trillion dollars but conditioned it on a significant reduction in spending totaling 4.5 trillion dollars. The House introduced the proposal, though Democratic lawmakers resisted these cuts. Democrats, with Yellen among them, favored an unconditional approach to raise the borrowing limit, and Biden has supported that stance, signaling opposition to any budget cuts that would affect government programs.
In this framework, Biden described default as not an option, warning that a failure to act could push the economy toward recession and harm the country’s international standing.
What happens in case of default?
Even with the largest national debt in history, the core economy does not instantly collapse. The debt has been growing since 2001, yet maintaining it becomes costly for the treasury over time. For instance, in 2022, payments to holders of U.S. bonds totaled about 475 billion dollars, a sizable slice of the budget. Projections for 2023 suggested this figure could rise to around 700 billion dollars.
If lawmakers fail to reach a budget agreement, government funds could fall short for essential expenses such as civil servant salaries, pensions, and health benefits. Tax revenues and cash flow would also face strain, potentially triggering a default scenario where debt obligations cannot be met on time.
Analysts note that even a severe stress scenario might look operationally technical rather than a complete misallocation of funds. Moody’s Analytics has warned that a U.S. default could bring macroeconomic disruption comparable to the 2008 crisis, with ripple effects across commodity demand and global debt markets as other countries adjust to the shock.
In response to the stalemate, the Treasury may implement urgent measures, including temporarily delaying some payments and using available balances and current revenues to cover essential obligations. Reports from late spring suggested substantial funds remained on the Treasury’s balance sheet, highlighting the delicate balance between liquidity needs and broader spending requirements.