US can’t use default as a ‘cudgel’ to force policy changes, says Lloyd Blankfein

US can’t use default as a ‘cudgel’ to force policy changes, says Lloyd Blankfein

Speaking after a meeting with President Barack Obama, Lloyd Blankfein said that any attempt by Congress to use policy proposals as a weapon in their negotiations over America’s debt ceiling would have “extremely adverse” consequences.

“There is a consensus that we shouldn’t do anything that hurts this recovery,” Mr Blankfein said. “You can litigate these policy issues, you can relitigate these policy issues in a public forum, but they shouldn’t use the threat of causing the US to fail on its obligation to repay debt as a cudgel.”

The US government has already been shut down for two days because of a political stand-off, in which the Republicans say they will only agree to stop-gap budget measures if the White House delays Mr Obama’s flagship healthcare scheme by a year.

Economists and politicians fear that the stalemate could also affect the much more serious, parallel negotiations to extend America’s self-imposed $ 16.7 trillion debt ceiling.

America is due to breach the limit on October 17, at which point the US government would have to cut spending by 20pc and would almost certainly default on its debt repayments. This would send interest rates up around the world, and could send the US back into recession, economists have warned.

Mr Blankfein said his view was shared by 14 other business leaders, who also met with Mr Obama at the White House, and who represented “every point on political spectrum”.

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