Larry Summers Says Odds On Technical Default Over Debt Ceiling Stand At 2-3%: But Watch Out! House Republicans Pass Kevin McCarthy's Bill

Former Treasury Secretary Lawrence Summers reportedly said the odds that the U.S. government could witness a technical debt default due to debt ceiling legislation stood at around 2%-3%.

What Happened: Summers said, “I think the odds on a technical default associated with the debt limit legislation over the next few months are 2% or 3%, and if it happens it will be repaired fairly quickly.” Summers said this at a Morningstar investment conference in Chicago, according to a Reuters report.

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The former Treasury Secretary's comments came in the wake of a stand-off between Republicans and Democrats over raising the borrowing limit that has started to impact money markets. Incoming tax receipts recently indicated the deadline to raise the $31.4 trillion borrowing limit could be reached sooner than expected, the report said.

Summers also said the chances of a default due to insolvency were much lower.

“I think the odds that we will default in the sense of insolvency, and over some interval people who hold bonds will not be able to get paid, are — assuming the absence of a major war — certainly under 2% over the next decade,” he said.

Vote: The House of Representatives, on Wednesday, narrowly passed a bill to raise the debt ceiling that includes significant spending cuts over the next decade, a Reuters report said.

The bill, however, isn’t expected to pass the Senate and President Joe Biden would veto it if it did. “We’ve done our job,” House Speaker Kevin McCarthy told reporters just after the vote, according to the report.

White House Press Secretary Karine Jean-Pierre said Biden would not sign off on the spending cuts. “President Biden will never force middle class and working families to bear the burden of tax cuts for the wealthiest, as this bill does,” she said in a statement. “The President has made clear this bill has no chance of becoming law,” Jean-Pierre added.

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