Biden Dials Up Pressure: ‘World Is in Trouble’ If We Default

Jenny Leonard
·4 min read
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(Bloomberg) -- President Joe Biden said a US default would drag the country into a recession and have devastating repercussions across the global economy as he sought to ramp up pressure on Republicans to strike a deal to raise the US debt limit.

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“If we default on our debt, the whole world is in trouble,” Biden said Wednesday at Westchester Community College in Valhalla, New York.

Biden painted a stark picture of the fallout from an unprecedented default, which he said would hit Americans’ pocketbooks and weaken the country’s standing abroad.

“Higher interest rates for credit cards, car loans and mortgages. Payments for Social Security, Medicare, our troops, veterans could all be delayed,” said Biden. “Our economy would fall into recession. And our international reputation would be damaged in the extreme. We shouldn’t even be talking about this situation.”

The president’s remarks came a day after he held a meeting with congressional leaders that by all accounts made little headway toward an agreement on raising the debt ceiling.

Earlier: Biden, McCarthy Vow More Debt-Limit Talks as US Default Looms

Biden spoke in the Hudson Valley district of US Representative Michael Lawler, a moderate freshman Republican who won his seat by just 1,820 votes last year. The president is seeking to pressure Lawler and other swing-district Republicans to break with their party leaders and vote for an increase in the $31.4 trillion debt limit — without spending cuts the GOP is demanding in exchange.

Lawler voted with all but four fellow House Republicans to pass a bill to raise the debt ceiling by $1.5 trillion in exchange for $4.8 trillion in spending cuts over 10 years. Biden praised Lawler, who attended the address, as the kind of lawmaker he could work with, even as he assailed Republicans for seeking to tie an increase in the borrowing cap to spending cuts.

“Mike’s on the other team, but you know what, Mike is the kind of guy that when I was in Congress, he was the kind of guy I was used to dealing with,” Biden said, adding, “I don’t want to get him in trouble by saying anything nice about him.”

QuickTake: What’s the Debt Ceiling, and Will the US Raise It?

Lawler, who sat in the front row for Biden’s remarks, said afterwards that he “had the opportunity to speak to the president before the speech and it was a cordial conversation.” He said Biden told him he didn’t choose his district to put pressure on him.

“I conveyed to him, obviously my belief that he needs to negotiate with the speaker in good faith.” he said. “This is obviously not a dictatorship, not a monarchy.”

Tense Talks

A much-anticipated sitdown at the White House on Tuesday between Biden, House Speaker Kevin McCarthy and other leaders ended with congressional aides and presidential staff tasked with discussions and the principals agreeing to meet again Friday — but without any significant breakthroughs.

The window for negotiating a deal to avoid an unprecedented default is closing. Treasury Secretary Janet Yellen has said the US could run out of cash to meet payment obligations as soon as June 1, and markets have shown signs of anxiety over a potential default.

The White House has said it will only accept a “clean” no-strings-attached debt limit increase although Biden is open to separate talks on fiscal 2024 budget levels.

Tuesday marked the first of seven days in May when both congressional chambers are available with Biden also in Washington — an even narrower time frame to strike a deal. Biden opened the door to the possibility of canceling his trip to the Group of Seven leaders’ summit in Japan next week if talks come down to the wire.

The economy will be a key factor in Biden’s reelection hopes as he contends with persistent inflation, a regional banking crisis and the risk of a recession. A historic default would only compound those woes.

Lawler’s seat is one that Democrats are targeting. On Tuesday, Liz Gereghty, the sister of Michigan Governor Gretchen Whitmer, announced she’s running as a Democrat to oust Lawler. Gereghty has little political experience, but as the sister of a prominent Democratic governor who is a prolific fundraiser, she is likely to be a strong challenger.

--With assistance from Gregory Korte and Bill Allison.

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