Business Leaders Nervous Ahead of Debt-Ceiling Talk

President Joe Biden and House Speaker Kevin McCarthy (R-Calif.) depart the U.S. Capitol in Washington, on March 17, 2023. (Drew Angerer/Getty Images)

Ahead of today’s high-stakes meeting between President Joe Biden and congressional leaders to discuss raising the debt ceiling, U.S. business executives have issued a stern warning, urging both parties to reach an agreement. The cost of a default or even the possibility of one is too high, the group warned.

“With the U.S. at risk of defaulting on its obligations as soon as June 1, meaningful, bipartisan discussions on raising the debt ceiling can no longer wait,” Business Roundtable CEO Joshua Bolten said in a statement on Monday.

“A default would deliver a severe blow to the economy, leading to widespread job losses, decimated retirement savings, and higher borrowing costs for families, businesses, and the government,” Bolten continued. “Failing to raise the debt limit would also threaten the U.S. dollar’s central role in the global financial system to the benefit of China.”

The Business Roundtable is an organization of chief executives of major U.S. corporations that advocate for pro-business policies. The group supports one in four American jobs and almost a quarter of the country’s gross domestic product, according to its website.

The group urged both the White House and congressional leaders “to commit to substantive negotiations on an agreement that can pass the House and Senate.”

“The cost of a default, or even the threat of a default, is simply too high,” Bolten said.

The U.S. Chamber of Commerce issued a similar warning last week, noting that default on the federal government’s debt “would be catastrophic for the U.S. economy.”

“The U.S. economy and global financial system are all underpinned by the idea that the U.S. government—unlike others around the world—always pays its bills. Investments in U.S. debt are considered ‘risk-free,’ which means the federal government pays less to borrow money,” the group stated.

“Defaulting would mean that the U.S. government no longer always pays its bills. Treasurys would no longer be risk-free. Interest rates for the government and everyone else would rise as the financial system tries to sort itself out. The role of the dollar globally would be weakened, perhaps permanently. Most analysts believe this would result in an immediate recession with long-term negative effects.”

Since World War II, the U.S. government has raised the debt ceiling 102 times.

Treasury Secretary Janet Yellen delivered a letter (pdf) to Congress on May 1, stating that the Treasury Department may run out of extraordinary measures and would be unable to meet the government’s obligations as early as June 1.

The Congressional Budget Office (CBO) made a similar prediction last week, indicating that the “extraordinary measures invoked by the Treasury secretary will be exhausted by June 2023.”

The chamber believes that a clean debt-limit increase cannot be passed by Congress and thus suggests a short-term extension as one option.

“Congress and the administration could agree to a short-term extension, potentially lining up the debt limit with the beginning of the new fiscal year on Oct. 1,” the group suggested.

However, the White House has restated Biden’s position on debt limit, which he has held publicly for some time.

“Look, there shouldn’t be negotiations on the debt limit. This is something that they should get to regular order and get to work on. We should not have House Republicans manufacturing a crisis on something that has been done 78 times since 1960,” White House press secretary Karine Jean-Pierre said at a press briefing on May 8.

“This is their constitutional duty. Congress must act. That’s what the president is going to make very clear with ... with the leaders tomorrow.”