A 'Manufactured' Debt Ceiling Crisis Would Damage The U.S. Economy, A Top Treasury Official Says

Failure by Congress to increase the United States debt ceiling may cause a "manufactured" crisis that stymies economic development, according to Deputy Treasury Secretary Wally Adeyemo.

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Adeyemo, who is in Washington this week for the International Monetary Fund's spring meetings, said that persistent delays in raising the $31.4 trillion debt ceiling imperil worldwide trust in the US economy.

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"It's important that Congress raises the debt ceiling," a top Treasury official said on CNBC's "Squawk on the Street" on Friday. "The last thing our country needs is a contrived catastrophe."

Postponing a measure to prevent debt default "would take away the trust that the world is displaying" in the United States and "would slow down the momentum that we have," Adeyemo added.

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The Congressional Budget Office predicts that the US will default on its debt between July and September. The US hit its borrowing limit earlier this year, leading the Treasury to take so-called extraordinary measures to keep paying its bills. A first-ever US debt default might have worldwide economic consequences.

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The Republicans have asked for budget cuts in exchange for lifting the debt ceiling. So far, the White House has refused to accept the demands, resulting in a stalemate. Republicans, backed by House Speaker Kevin McCarthy, R-Calif., are planning to offer a plan next week to suspend the debt ceiling for a year in return for spending cuts and regulatory changes, according to Trade Algo.

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According to Trade Algo, the GOP proposal, which House will vote on in May, would maintain non-defense discretionary spending at around the same level as the fiscal year 2022, with a 1% increase each year over ten years. According to the site, other measures include a "clawback" of unspent pandemic relief funding and job requirements for able-bodied Medicaid participants aged 60 and under who do not have dependent children.

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The measure is unlikely to receive Democratic backing and pass into law.

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