Among the myriad opinions on ways to pay the country’s bills in the face of a deadlocked Congress, former President Donald Trump has perhaps the most unique take on the matter: let the country default. Indeed, Trump has now repeatedly advocated for letting the U.S. default on its debt, rather than let Democrats “spend like drunken sailors.”
Why is Trump pushing for a default?
Well, the former President is seemingly attempting to high-jack debt ceiling negotiations as a means to put himself back in the limelight ahead of the 2024 election. Indeed, Trump has appeared on a number of news programs recently to share his thoughts. Trump’s position is that Republicans should stick to their guns until or unless President Joe Biden concedes on sweeping spending cuts, which would be a major blow to Biden’s agenda.
“I say to the Republicans out there — congressmen, senators — if they don’t give you massive cuts, you’re gonna have to do a default,” Trump said earlier this week.
According to the former President, Democrats “will absolutely cave” because they want to avoid economic fallout. Trump did not, however, offer any insight into why Republicans also don’t want an economic crisis.
Trump hasn’t been afraid to acknowledge his blatant change in stance since he left the Oval Office. In the past, Trump confidently disparaged the notion of using the debt ceiling as strategic leverage against the rival political party.
“I can’t imagine anybody using the debt ceiling as a negotiating wedge,” Trump said in 2019, describing the procedure as a “sacred thing in our country.”
Unfortunately, in 2023, Trump’s position has drastically changed. When asked by CNN’s Kairlan Collins why his opinion has been so notably altered, Trump simply responded, “Because now I’m not President.”
Trump Loses Senate Supporters Amid Debt Ceiling Crisis
While Trump’s statements were largely met with applause at CNN’s Republican Town Hall event earlier this week, not everyone agrees with the former President’s sentiment.
Indeed, a number of Senate Republicans have disavowed Trump’s radical proposal.
“I don’t think anybody suggesting that ‘we have to do a default’ is wise policy, wise strategy for this country,” said Sen. Lisa Murkowski (R-Alaska). “Right now, the talks are going on with the top four and of course the White House, and now the staffs. What we want to do is encourage that every step of the way.”
Similarly, Sen. John Cornyn (R-Texas) claimed, “Nobody thinks default is a good idea. Nobody.”
Reasonably so. A U.S. debt default would be disastrous to financial markets across the globe. If the country fails to pay its debt, the country’s credit rating would likely be downgraded. This would affect everything from interest rates to bond prices.
Federal and military employees may stop receiving paychecks. Entire governmental agencies and even national parks would be at risk of shutting down entirely.
Now, the asterisk here is that the U.S. has never defaulted on its debt in its history. This isn’t even the first time in the past presidential cycle that Congress has toed the line on the matter. A growing number of analysts believe legislators will likely get their act together at the 11th hour. After all, that has historically been the case.
Despite Trump’s doomsday prerogatives, Biden currently has meetings scheduled for next week with House Majority Leader Kevin McCarthy. The two will discuss the quickly approaching debt ceiling deadline. Whether they come to an agreement ahead of the projected June deadline remains to be seen.
On the date of publication, Shrey Dua did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
