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    Debt Default Would Cripple U.S. Economy, New Analysis Warns

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    As President Biden prepares to release his latest budget proposal, a top economist warned lawmakers that Republicans’ refusal to raise the nation’s borrowing cap could put millions out of work.WASHINGTON — The U.S. economy could quickly shed a million jobs and fall into recession if lawmakers fail to raise the nation’s borrowing limit before the federal government exhausts its ability to pay its bills on time, the chief economist of Moody’s Analytics, Mark Zandi, warned a Senate panel on Tuesday.The damage could spiral to seven million jobs lost and a 2008-style financial crisis in the event of a prolonged breach of the debt limit, in which House Republicans refuse for months to join Democrats in voting to raise the cap, Mr. Zandi and his colleagues Cristian deRitis and Bernard Yaros wrote in an analysis prepared for the Senate Banking Committee’s Subcommittee on Economic Policy.Senator Elizabeth Warren, Democrat of Massachusetts, held the subcommittee hearing on the debt limit, and its economic and financial consequences, at a moment of fiscal brinkmanship. House Republicans are demanding deep spending cuts from President Biden in exchange for voting to raise the debt limit, which caps how much money the government can borrow.That debate is likely to escalate when Mr. Biden releases his latest budget proposal on Thursday. The president is expected to propose reducing America’s reliance on borrowed money by raising taxes on high earners and corporations. But he almost certainly will not match the level of spending cuts that will satisfy Republican demands to balance the budget in a decade.The report also warns of stark economic damage if Mr. Biden, in an attempt to avert a default, agrees to those demands. In that scenario, the “dramatic” spending cuts that would be needed to balance the budget would push the economy into recession in 2024, cost the economy 2.6 million jobs and effectively destroy a year’s worth of economic growth over the next decade, Mr. Zandi and his colleagues wrote.The U.S. economy could quickly shed a million jobs and fall into recession if lawmakers fail to raise the nation’s borrowing limit.Michelle V. Agins/The New York Times“The only real option,” Mr. Zandi said in an interview before his testimony, “is for lawmakers to come to terms and increase the debt limit in a timely way. Any other scenario results in significant economic damage.”Understand the U.S. Debt CeilingCard 1 of 5What is the debt ceiling? More

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    Republican Votes Helped Washington Pile Up Debt

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    As they escalate a debt-limit standoff, House Republicans blame President Biden’s spending bills for an increase in deficits. Voting records show otherwise.WASHINGTON — President Biden will submit his latest budget request to Congress on Thursday, offering what his administration says will be $2 trillion in plans to reduce deficits and future growth of the national debt.Republicans, who are demanding deep spending cuts in exchange for raising the nation’s borrowing cap, will almost certainly greet that proposal with a familiar refrain: Mr. Biden and his party are to blame for ballooning the debt.But an analysis of House and Senate voting records, and of fiscal estimates of legislation prepared by the nonpartisan Congressional Budget Office, shows that Republicans bear at least equal blame as Democrats for the biggest drivers of federal debt growth that passed Congress over the last two presidential administrations.The national debt has grown to $31.4 trillion from just under $6 trillion in 2000, bumping against the statutory limit on federal borrowing. That increase, which spanned the presidential administrations of two Republicans and two Democrats, has been fueled by tax cuts, wars, economic stimulus and the growing costs of retirement and health programs. Since 2017, when Donald J. Trump took the White House, Republicans and Democrats in Congress have joined together to pass a series of spending increases and tax cuts that the budget office projects will add trillions to the debt.The analysis is based on the forecasts that the C.B.O. regularly issues for the federal budget. They include descriptions of newly passed legislation that affects spending, revenues and deficits, tallying the costs of those new laws over the course of a decade. Going back to the start of Mr. Trump’s tenure, those reports highlight 13 new laws that, by the C.B.O.’s projections, will combine to add more than $11.5 trillion to the debt.Nearly three-quarters of that new debt was approved in bills that gained the support of a majority of Republicans in at least one chamber of Congress. Three-fifths of it was signed into law by Mr. Trump.Some of those bills were in response to emergencies, like the early rounds of stimulus payments to people and businesses during the pandemic. Others were routine appropriations bills, which increased spending on the military and on domestic issues like research and education.Understand the U.S. Debt CeilingCard 1 of 5What is the debt ceiling? More

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    IRS Decision Not to Tax Certain Payments Carries Fiscal Cost

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    The Biden administration has opted not to tax state payments to residents, a decision that could add to the nation’s fiscal woes.WASHINGTON — More than 20 state governments, flush with cash from federal stimulus funds and a rebounding economy, shared their windfalls last year by sending residents one-time payments.This year, the Biden administration added a sweetener, telling tens of millions taxpayers they did not need to pay federal taxes on those payments.That decision by the Internal Revenue Service, while applauded by some tax experts and lawmakers, could cost the federal government as much $4 billion in revenue at a time when Washington is struggling with a ballooning federal deficit and entering a protracted fight over the nation’s debt limit.The I.R.S.’s ruling came after bipartisan pressure from lawmakers and was the latest move by the agency to forgo revenue this tax season.In December, the I.R.S. delayed by a year a new requirement that users of digital wallets like Venmo and Cash App report income on 1099-K forms if they had more than $600 of transactions. That requirement, which was part of the American Rescue Plan of 2021, was projected to raise nearly $1 billion in tax revenue per year over a decade. The last-minute decision to delay it followed intense lobbying from business groups and political backlash directed at the Biden administration, which was accused of breaking its pledge not to raise taxes on people making less than $400,000.Taken together, the moves by the I.R.S. run counter to two big economic issues bedeviling Washington — rapid inflation and concerns about the government’s ability to avoid defaulting on its debt.Allowing residents to avoid paying taxes on their state rebates means more money in their pockets to spend at a moment when the Federal Reserve is trying to rein in consumer and business spending to cool rising prices. A report released on Friday showed that, despite the Fed’s efforts to slow the economy, personal spending sped up in January.Understand the U.S. Debt CeilingCard 1 of 5What is the debt ceiling? More

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    U.S. Could Default on Debt as Early as Summer, New Estimate Says

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    The Bipartisan Policy Center said the nation could run out of cash this summer or early fall if Congress did not raise the debt limit.WASHINGTON — The United States faces a default sometime this summer or early fall if Congress does not raise or suspend the debt ceiling, a Washington think tank warned on Wednesday.The projection from the Bipartisan Policy Center is the latest estimate of when the government could run out of cash to pay its bills. The nation, which borrows huge sums to help pay for everything from military salaries to Social Security benefits, hit its $31.4 trillion borrowing cap on Jan. 19. Since then, the Treasury Department has been employing what are known as extraordinary measures to ensure that the government has enough to pay what it owes, including payments to bondholders.“We anticipate that those emergency measures, as well as the cash that Treasury has on hand, will most likely be exhausted at some point during the summer or early fall,” Shai Akabas, the center’s director of economic policy, said during a briefing on Wednesday morning.Last week, the nonpartisan Congressional Budget Office projected that the department’s ability to prevent the United States from defaulting on its debt could be exhausted between July and September. That estimate was slightly more favorable than what Treasury Secretary Janet L. Yellen suggested when she told Congress last month that her department’s ability to keep financing the country’s obligations could be exhausted in June.The day when the United States runs out of cash — known as the X date — depends largely on how much the Treasury Department collects in 2022 tax revenue, the Bipartisan Policy Center said. The group warned that moment could be “too close for comfort” given the vagaries around tax receipts.“There is a possibility that the cash balance in early to mid-June will be so low that it will necessitate action,” Mr. Akabas said. He added that given “the considerable uncertainty in our nation’s current economic outlook,” it was impossible to know for certain when the X date might happen.“Policymakers have an opportunity now to inject certainty into the U.S. and global economy by beginning, in earnest, bipartisan negotiations around our nation’s fiscal health and taking action to uphold the full faith and credit of the United States well before the X date,” he said.Ms. Yellen’s extraordinary measures to keep the government running have included redeeming some existing investments and suspending new investments in the Civil Service Retirement and Disability Fund and the Postal Service Retiree Health Benefits Fund. Once those measures are exhausted, the United States will need to borrow more money or face default. She has urged Congress to raise or suspend the debt limit.It remains unclear how quick or easy it would be to do that. Republican lawmakers have insisted that President Biden agree to undefined spending cuts to win their votes to raise the cap, arguing that the borrowing binge is putting the United States on a path to fiscal disaster. Mr. Biden has insisted that he will not negotiate spending cuts as part of any debt limit legislation, saying that the cap has to be raised to fund obligations that Congress — including Republicans — have already approved. More

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    President Biden Is Not Backing Off His Big-Government Agenda

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    In his first appearance before a Republican House, the president renewed calls for large new economic programs and offered no concessions on federal spending.WASHINGTON — There were no economic pivots in President Biden’s first State of the Union address to a Republican House. He did not pare back his push to raise taxes on high earners or to spend big on new government programs. He offered no olive branches to conservatives who have accused him of running the country into crisis with government borrowing.It was a shift from Mr. Biden’s two most recent Democratic predecessors in the White House, who tacked toward a more conciliatory and limited-government approach to economic policy after losing at least one chamber of Congress. But on Tuesday night, Mr. Biden barreled ahead. The president renewed his calls for trillions of dollars of new federal programs, including for child care and community college, over the sometimes raucous objections of Republicans who have centered their fight with Mr. Biden on the issue of spending and debt. He did not name a single federal spending program he was willing to cut. He said he would work to reduce budget deficits, but by raising taxes on high earners and corporations, a position anathema to Republicans.The speech was not a blueprint to pass any of those proposals, which have little chance of becoming law during his first term.Instead, it was a defiant opening bid for a high-stakes clash over raising the nation’s borrowing limit. It was a no-quarter recommitment to a campaign theme aimed squarely at blue-collar voters in 2024 swing states, centered on expanding government in pursuit of what Mr. Biden calls “middle-out” economic policy.Aides say the choice to defy Republicans’ calls for Mr. Biden to change course on economic policy was deliberate, reflecting both the president’s deeply held convictions on policy and his belief that he has found a winning political message.It was also a bet that the economy, which has so far been a drag on Mr. Biden’s popularity, will ultimately prove to be a tailwind in his widely expected re-election campaign. Rapid price gains are beginning to ease, and jobs are plentiful, with the unemployment rate at its lowest point since 1969.Biden’s State of the Union AddressChallenging the G.O.P.: In the first State of the Union address of a new era of divided government, President Biden delivered a plea to Republicans for unity but vowed not to back off his economic agenda.State of Uncertainty: Mr. Biden used his speech to portray the United States as a country in recovery. But what he did not emphasize was that America also faces a lot of uncertainty in 2023.Foreign Policy: Mr. Biden spends his days confronting Russia and China. So it was especially striking that in his address, he chose to spend relatively little time on America’s global role.A Tense Exchange: Before the speech, Senator Mitt Romney admonished Representative George Santos, a fellow Republican, telling him he “shouldn’t have been there.”To that end, Mr. Biden spent much of the speech proclaiming that the American economy is faring better on his watch than his critics — or even many of his voters — concede. He dived into details about laws he has signed to invest in water pipes, semiconductor factories, electric vehicles and more, while promising those plans would bring high-paying jobs to workers without college degrees. He promised consumer-friendly crackdowns on credit card fees, social media companies and more. On Wednesday, Mr. Biden was headed to Wisconsin to promote his economic legislation, while his cabinet secretaries fanned out across the country to do the same.“We’re building an economy where no one’s left behind,” Mr. Biden said in his speech. “Jobs are coming back, pride is coming back, because choices we made in the last several years. You know, this is, in my view, a blue-collar blueprint to rebuild America and make a real difference in your lives at home.”“Here’s my message to all of you out there,” he added later. “I have your back.”Mr. Biden’s approach underscored how he has not regarded the Republican House takeover as a rebuke of his policies..css-1v2n82w{max-width:600px;width:calc(100% – 40px);margin-top:20px;margin-bottom:25px;height:auto;margin-left:auto;margin-right:auto;font-family:nyt-franklin;color:var(–color-content-secondary,#363636);}@media only screen and (max-width:480px){.css-1v2n82w{margin-left:20px;margin-right:20px;}}@media only screen and (min-width:1024px){.css-1v2n82w{width:600px;}}.css-161d8zr{width:40px;margin-bottom:18px;text-align:left;margin-left:0;color:var(–color-content-primary,#121212);border:1px solid var(–color-content-primary,#121212);}@media only screen and (max-width:480px){.css-161d8zr{width:30px;margin-bottom:15px;}}.css-tjtq43{line-height:25px;}@media only screen and (max-width:480px){.css-tjtq43{line-height:24px;}}.css-x1k33h{font-family:nyt-cheltenham;font-size:19px;font-weight:700;line-height:25px;}.css-1hvpcve{font-size:17px;font-weight:300;line-height:25px;}.css-1hvpcve em{font-style:italic;}.css-1hvpcve strong{font-weight:bold;}.css-1hvpcve a{font-weight:500;color:var(–color-content-secondary,#363636);}.css-1c013uz{margin-top:18px;margin-bottom:22px;}@media only screen and (max-width:480px){.css-1c013uz{font-size:14px;margin-top:15px;margin-bottom:20px;}}.css-1c013uz a{color:var(–color-signal-editorial,#326891);-webkit-text-decoration:underline;text-decoration:underline;font-weight:500;font-size:16px;}@media only screen and (max-width:480px){.css-1c013uz a{font-size:13px;}}.css-1c013uz a:hover{-webkit-text-decoration:none;text-decoration:none;}How Times reporters cover politics. We rely on our journalists to be independent observers. So while Times staff members may vote, they are not allowed to endorse or campaign for candidates or political causes. This includes participating in marches or rallies in support of a movement or giving money to, or raising money for, any political candidate or election cause.Learn more about our process.It defied the example set by Mr. Biden’s Democratic predecessors after they lost House control in their first midterms. President Bill Clinton promised a new era of smaller government in 1995. President Barack Obama vowed in 2011 “to take responsibility for our deficit” and proposed what he called “painful cuts” to domestic spending.Mr. Biden offered no apology for his policies. He cast himself as more fiscally responsible than his immediate predecessor, former President Donald J. Trump, in claiming credit for a $1.7 trillion decline in the federal budget deficit last year. That improvement was largely the product of expiring pandemic aid programs, but Mr. Biden suggested he would take steps to keep winnowing the shortfall between what the government spent and what it earned through taxes and other revenue. He said his next budget, which will be released on March 9, would further reduce deficits by $2 trillion over a decade.In a sharp contrast with Republicans, he called for raising taxes on corporations and the wealthy as a way to show a commitment to deficit reduction in spite of his spending plans. His proposals included an expanded tax on stock buybacks and what would effectively be a sort of wealth tax on billionaires.He baited Republicans on a pair of politically cherished programs, Social Security and Medicare, drawing sustained jeers when he said some of his opponents wanted to sunset the programs. While hundreds of Republican lawmakers have signed on to plans to reduce spending on the safety net by raising retirement ages and other reductions in future benefits, Mr. Biden’s “sunset” accusation rests on the possible effects of a plan to reauthorize spending programs every five years, advanced by Senator Rick Scott of Florida, which has gained little traction among party leaders.Republicans called the speech a departure from Mr. Biden’s previous calls for unity and a disconnect on major economic issues.“While the president is busy taking a premature and undeserved victory lap, lauding legislation that Democrats passed on a party-line basis, families in West Virginia and America are struggling at every turn because many of the policies and priorities of this administration have made the American dream harder to attain,” Senator Shelley Moore Capito, Republican of West Virginia, said in a release after the address.Mr. Biden’s allies cheered. The president “delivered a bold blueprint for an economy that, at long last, puts working people first,” Liz Shuler, the president of the powerful A.F.L.-C.I.O. labor organization, said in a news release on Tuesday evening.Mr. Biden fashions himself a congressional deal maker, and on Tuesday, he outlined a handful of smaller-scale initiatives on other issues, like curbing the flow of fentanyl and regulating big tech, that might plausibly win bipartisan support in the new Congress. But the speech was not a recipe for economic compromise.The president re-upped calls for big new federal investments in child care and assistance for the elderly, community college, prekindergarten and health insurance. But he offered no plausible road to finishing the job, as he put it, on that long list of proposals, which he was unable to include in the wide array of economic legislation he signed in his first two years because of opposition from centrist Democrats in the Senate.What he did outline was a defiant negotiating posture, as he and Republican lawmakers battle over raising the $31.4 trillion federal borrowing limit, which the United States hit last month. That cap, which limits the government’s ability to borrow funds to pay for spending that Congress has already authorized, must be suspended or lifted later this year in order for the United States to continue paying its bills and avoid a financial crisis.Republicans are refusing to raise the limit unless Mr. Biden agrees to deep spending cuts. Mr. Biden has said he will refuse to bargain over the borrowing cap and on Tuesday night reminded Republicans that they had agreed to effectively increase the debt limit three times when Mr. Trump was president. Despite what both sides called a productive meeting at the White House last week between the president and Speaker Kevin McCarthy, Republican of California, Mr. Biden did not waver in that position on Tuesday.“We’re not going to be moved into being threatened to default on the debt,” Mr. Biden said.Mr. McCarthy, seated behind him, did not look pleased. More

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    Biden Weighs State of the Union Focus on His Unfinished Agenda

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    As the president prepares for his national address, his aides debate an emphasis on his still-unrealized plans for child care, prekindergarten and more.WASHINGTON — President Biden’s top economic aides have battled for weeks over a key decision for his State of the Union address on Tuesday: how much to talk about child care, prekindergarten, paid leave and other new spending proposals that the president failed to secure in the flurry of economic legislation he signed in his first two years in office.Some advisers have pushed for Mr. Biden to spend relatively little time on those efforts, even though he is set to again propose them in detail in the budget blueprint he will release in March. They want the president to continue championing the spending he did sign into law, like investments in infrastructure like roads and water pipes, and advanced manufacturing industries like semiconductors, while positioning him as a bipartisan bridge-builder on critical issues for the middle class.Other aides want Mr. Biden to spend significant time in the speech on an issue set that could form the core of his likely re-election pitch to key swing voters, particularly women. Polls by liberal groups suggest such a focus, on helping working families afford care for their children and aging parents, could prove a winning campaign message.The debate is one of many taking place inside the administration as Mr. Biden tries to determine which issues to focus on in a speech that carries extra importance this year. It will be Mr. Biden’s first address to the new Republican majority in the House, which has effectively slammed the brakes on his legislative agenda for the next two years. And it could be a preview for the themes Mr. Biden would stress on the 2024 campaign trail should he run for a second term.Administration officials caution that Mr. Biden has not finalized his strategy. A White House official said Friday that the president was preparing to tout his economic record and his full vision for the economy.The Biden PresidencyHere’s where the president stands as the third year of his term begins.State of the Union: President Biden will deliver his second State of the Union speech on Feb. 7, at a time when he faces an aggressive House controlled by Republicans and a special counsel investigation into the possible mishandling of classified information.Chief of Staff: Mr. Biden named Jeffrey D. Zients, his former coronavirus response coordinator, as his next chief of staff. Mr. Zients replaces Ron Klain, who has run the White House since the president took office.Economic Aide Steps Down: Brian Deese, who played a pivotal role in negotiating economic legislation Mr. Biden signed in his first two years in office, is leaving his position as the president’s top economic adviser.Eyeing 2024: Mr. Biden has been assailing House Republicans over their tax and spending plans, including potential changes to Social Security and Medicare, as he ramps up for what is likely to be a run for re-election.Few of Mr. Biden’s advisers expect Congress to act in the next two years on paid leave, an enhanced tax credit for parents, expanded support for caregivers for disabled and older Americans or expanded access to affordable child care. All were centerpieces of the $1.8 trillion American Families Plan Mr. Biden announced in the first months of his administration. Mr. Biden proposes to offset those and other proposals with tax increases on high earners and corporations.Earlier this week, Mr. Biden hinted that he may be preparing to pour more attention on those so-called “care economy” proposals, which he and his economic team say would help alleviate problems that crimp family budgets and block would-be workers from looking for jobs.At a White House event celebrating the 30th anniversary of a law that mandated certain workers be allowed to take unpaid medical leave, Mr. Biden ticked through his administration’s efforts to invest in a variety of care programs in the last two years, while acknowledging failure to pass federally mandated paid leave and other larger programs.Mr. Biden said he remained committed to “passing a national program of paid leave and medical leave.”“And, by the way, American workers deserve paid sick days as well,” he said. “Paid sick days. Look, I’ve called on Congress to act, and I’ll continue fighting.”.css-1v2n82w{max-width:600px;width:calc(100% – 40px);margin-top:20px;margin-bottom:25px;height:auto;margin-left:auto;margin-right:auto;font-family:nyt-franklin;color:var(–color-content-secondary,#363636);}@media only screen and (max-width:480px){.css-1v2n82w{margin-left:20px;margin-right:20px;}}@media only screen and (min-width:1024px){.css-1v2n82w{width:600px;}}.css-161d8zr{width:40px;margin-bottom:18px;text-align:left;margin-left:0;color:var(–color-content-primary,#121212);border:1px solid var(–color-content-primary,#121212);}@media only screen and (max-width:480px){.css-161d8zr{width:30px;margin-bottom:15px;}}.css-tjtq43{line-height:25px;}@media only screen and (max-width:480px){.css-tjtq43{line-height:24px;}}.css-x1k33h{font-family:nyt-cheltenham;font-size:19px;font-weight:700;line-height:25px;}.css-1hvpcve{font-size:17px;font-weight:300;line-height:25px;}.css-1hvpcve em{font-style:italic;}.css-1hvpcve strong{font-weight:bold;}.css-1hvpcve a{font-weight:500;color:var(–color-content-secondary,#363636);}.css-1c013uz{margin-top:18px;margin-bottom:22px;}@media only screen and (max-width:480px){.css-1c013uz{font-size:14px;margin-top:15px;margin-bottom:20px;}}.css-1c013uz a{color:var(–color-signal-editorial,#326891);-webkit-text-decoration:underline;text-decoration:underline;font-weight:500;font-size:16px;}@media only screen and (max-width:480px){.css-1c013uz a{font-size:13px;}}.css-1c013uz a:hover{-webkit-text-decoration:none;text-decoration:none;}How Times reporters cover politics. We rely on our journalists to be independent observers. So while Times staff members may vote, they are not allowed to endorse or campaign for candidates or political causes. This includes participating in marches or rallies in support of a movement or giving money to, or raising money for, any political candidate or election cause.Learn more about our process.For Mr. Biden, continuing to call for new spending initiatives aimed at lower- and middle-income workers would draw a clear contrast with the still-nascent field of Republicans seeking the White House in 2024. It would cheer some outside advocacy groups that have pushed him to renew his focus on programs that would particularly aid women and children.The State of the Union speech “presents the president with a rare opportunity to take a victory lap and, simultaneously, advance his agenda,” the advocacy group First Focus on Children said in a news release this week. “All to the benefit of children.”The efforts could also address what Mr. Biden’s advisers have identified as a lingering source of weakness in the recovery from the pandemic recession: high costs of caregiving, which are blocking Americans from looking for work. The nonprofit group ReadyNation estimates in a new report that child care challenges cost American families $78 billion a year and employers another $23 billion.“Among prime-age people not working in the United States, roughly half of them list care responsibilities as the main reason for not participating in the labor force,” Heather Boushey, a member of the White House Council of Economic Advisers, told reporters this week. She noted that the jobs rebound has lagged in care industries like nursing homes and day care centers.“These remain economic challenges and addressing them could go a long ways towards supporting our nation’s labor supply,” she said.But focusing on that unfinished economic work could conflict with Mr. Biden’s repeated efforts this year to portray the economy as strong and position him as a president who reached across the aisle to secure big new investments that are lifting growth and job creation. On Friday, the president celebrated news that the economy created 517,000 jobs in January, in a brief speech that did not mention the challenges facing caregivers.Calling for vast new spending programs also risks further antagonizing House conservatives, who have made government spending their first large fight with the president. Republicans have threatened to allow the United States to fall into an economically catastrophic default on government debt by not raising the federal borrowing limit, unless Mr. Biden agrees to sharp cuts in existing spending.“Revenue into the government has never been higher,” Speaker Kevin McCarthy, Republican of California, told reporters on Thursday, a day after he met with Mr. Biden at the White House to discuss fiscal issues and the debt limit. “It’s the highest revenue we’ve ever seen in. So it’s not a revenue problem. It’s a spending problem.”Catie Edmondson More

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    Can A Trillion Dollar Coin Resolve the Debt Ceiling Crisis?

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    The latest standoff over raising the nation’s debt ceiling is giving new life to an old theory about how to avoid a default.WASHINGTON — The debt limit standoff between Republicans and Democrats has elevated questions about creative solutions for averting a crisis, including one that at first blush might seem unthinkable: Could minting a $1 trillion platinum coin make the whole problem go away?What was once a fringe idea is now being presented to top economic policymakers as a serious remedy.Asked on Wednesday about the notion that there might be another option if Congress failed to lift the borrowing cap, Jerome H. Powell, the Federal Reserve chair, said there was not.“There’s only one way forward here, and that is for Congress to raise the debt ceiling so that the United States government can pay all of its obligations when due,” Mr. Powell said. “Any deviations from that path would be highly risky.”Treasury Secretary Janet L. Yellen was unable to avoid the debt limit crisis brewing back in the United States as she crisscrossed Africa last week and fielded queries about the coin, which she dismissed as a “gimmick.”Instead, Ms. Yellen sent two stern letters to Speaker Kevin McCarthy outlining the “extraordinary measures” she was taking to ensure the United States can keep paying its bills and urged Congress to “act promptly” to protect the nation’s full faith and credit by lifting the debt limit.President Biden told Mr. McCarthy on Wednesday that while there was room for discussion about addressing the deficit, Congress would have to pass a debt limit increase with no strings attached to avoid a financial cataclysm. Mr. Biden and Mr. McCarthy met at the White House for more than an hour in a discussion that carried high stakes, with the federal government set to exhaust its ability to pay its bills on time as early as June.But the idea of a coin still has its fair share of supporters, and they are not giving up.As political gridlock over the borrowing cap has hardened, the notion that the Treasury secretary could defuse the debt limit drama with her currency minting powers has re-emerged, including on Twitter, where the hashtag #MintTheCoin is again buzzing.Still, the feasibility of averting America’s debt crisis by minting a valuable piece of currency is far from clear. Here’s a look at origins of the coin, how it might be used and the potential consequences.A Most Extraordinary MeasureIf Congress cannot reach an agreement by early June to increase the debt limit, which was capped at $31.4 trillion in late 2021, Ms. Yellen’s ability to use government accounting tools to delay a default could soon be exhausted, and the United States would be unable to pay all of its bills on time.Treasury Secretary Janet L. Yellen in Zambia last month. She urged Congress to “act promptly” to protect the nation’s full faith and credit by lifting the debt limit.Fatima Hussein/Associated PressThis could cause a deep recession and potentially a financial crisis, shutting down large swaths of the economy and preventing beneficiaries of Social Security and Medicare from receiving their money. Although Ms. Yellen has the power to move funds around government accounts to delay a default, eventually the government’s coffers will run dry without the ability to raise more tax revenue or borrow more money.That’s where the coin comes in. Proponents of the idea believe Ms. Yellen could use her authority to instruct the U.S. Mint to produce a platinum coin valued at $1 trillion — or another large denomination — and deposit it with the Federal Reserve, the government’s banker, which manages the Treasury Department’s “general account.”Understand the U.S. Debt CeilingCard 1 of 5What is the debt ceiling? More

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    Biden and McCarthy Are Set to Discuss Debt Limit as Both Sides Trade Barbs

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    The hours leading up to the meeting have highlighted the differences between the White House and the Republicans who now control the House.WASHINGTON — President Biden will meet with Speaker Kevin McCarthy at the White House on Wednesday afternoon for a discussion that carries high stakes: the need to raise the nation’s borrowing limit in order to avoid a financial crisis.The meeting will be the first between the two leaders since Republicans assumed control of the House and conveyed the speaker title on Mr. McCarthy after a protracted fight.Republicans have refused to raise the statutory debt limit unless Mr. Biden accepts deep cuts in federal spending. The president has said repeatedly that he expects Congress to raise the borrowing cap with no strings attached — and that he will not negotiate conditions for an increase.Wednesday’s meeting will take place behind closed doors, but the hours leading up to it have highlighted the differences between the White House and the Republicans who now control the House. On Tuesday, Mr. Biden and Mr. McCarthy blamed each other for the impasse in raising the debt ceiling. The president called the speaker a “decent man” who had caved to extremists in his party to take power.He made “commitments that are just absolutely off the wall for a speaker of the House to make,” Mr. Biden told reporters on Tuesday.Understand the U.S. Debt CeilingCard 1 of 5What is the debt ceiling? More