Worst scenario to occur if Biden ignores debt ceiling: NYT

U.S. President Joe Biden is pictured during an event at the White House in Washington, D.C., the United States, April 24, 2023. (Photo by Aaron Schwartz/Xinhua)

Even the serious prospect of U.S. default would quickly raise debt-servicing costs, rendering the deficit larger than it currently is.

NEW YORK, May 10 (Xinhua) -- Debate has intensified over whether U.S. President Joe Biden might sidestep the debt ceiling so the nation can keep paying what it owes, and its consequences would affect the country's economy, the markets, the retirement savings and even the constitutional system, reported The New York Times (NYT) on Tuesday.

"There is encouraging news for the president and those who follow our first Treasury secretary, Alexander Hamilton, in believing we must pay our legally incurred debts. We are far better off doing so, even if it means short-term chaos should Mr. Biden allow the June 1 deadline to come and go," noted the report.

First, consider the consequences if the United States stopped paying its debts and defaulted on June 1. This would undo what Hamilton and his successors sought to ensure: a national credit rating beyond cavil or reproach. "We would see a great tottering -- if not worse -- of U.S. banking, U.S. financial markets and the world's capital markets," according to the report.

"We would also probably see a rapid plunge in the value of the dollar worldwide as a global reserve asset. Our currency's value in relation to others' is rooted primarily in global demand for dollar-denominated financial assets, since we have relinquished our primacy as a goods exporter to China," it said.

"Finally, even the serious prospect of U.S. default would quickly raise debt-servicing costs, rendering our deficit larger than it currently is -- a consequence dramatically at odds with Republicans' professed concerns about tying the debt ceiling hike to massive budget cuts," it added.