WASHINGTON — A failure by Congress to raise the U.S. debt ceiling could spark a “manufactured” crisis that derails economic progress, Deputy Treasury Secretary Wally Adeyemo said Friday.
Adeyemo, who has been meeting with world financial leaders in Washington this week during the International Monetary Fund’s spring meetings, said continued delays in hiking the $31.4 trillion debt limit threaten international confidence in the U.S. economy.
“It’s critical that Congress lift the debt limit,” the top Treasury official told CNBC’s “Squawk on the Street” on Friday. “The last thing we need is a manufactured crisis in our country.”
Pushing off a bill to avoid debt default “will take away from that confidence that the world is showing” the U.S. and “would slow down the momentum that we had,” Adeyemo said.
Economist Adewale “Wally” Adeyemo answers questions during his Senate Finance Committee nomination hearing to be Deputy Secretary of the Treasury in the Dirksen Senate Office Building, in Washington, D.C., February 23, 2021.
Greg Nash | Pool | Reuters
The Congressional Budget Office has warned that the government could default on its debt between July and September. The U.S. hit its borrowing limit earlier this year, forcing the Treasury to take so-called extraordinary measures to keep paying its bills. A first-ever U.S. default on its debt could wreak economic damage around the world.
The GOP has sought spending concessions in exchange for raising the debt limit. The White House has so far refused to entertain the demands, leading to an impasse. Republicans, led by House Speaker Kevin McCarthy, R-Calif., are preparing to present a plan next week for a yearlong suspension of the debt ceiling in exchange for cuts to certain spending programs and regulation changes, Bloomberg reported.
The GOP proposal, which Congress would vote on in May, would call for non-defense discretionary spending to remain at roughly the same level as the fiscal year 2022 with 1% growth per year over 10 years, according to Bloomberg. Other measures include a “clawback” of unspent pandemic relief funds and work requirements for able-bodied Medicaid recipients aged 60 and under without dependent children, the outlet reported.
The proposal is unlikely to win Democratic support and become law.