White House Warns Of 'catastrophe' Without Debt Deal

President Joe Biden's administration is warning of an "economic catastrophe" if the US Congress fails to increase the nation's borrowing limit.

But Republicans have vowed to withhold support for raising the debt ceiling – forcing Democrats in the majority to bear the political costs alone.

US Treasury Secretary Janet Yellen has warned that without an increase, the government will run out of cash to fund operations and pay its debts sometime in October.

"The US has never defaulted. Not once. Doing so would likely precipitate a historic financial crisis that would compound the damage of the continuing public health emergency," she said in a column on Monday in The Wall Street Journal.

The issue has frequently been a political football in politically-polarised Washington, with Republicans engaging in brinksmanship multiple times during the administration of Democrat Barack Obama.

But under Biden's predecessor Donald Trump, Democrats supported Republican efforts to suspend the debt limit for two years.

The ceiling was reinstated on August 1 with debt at US$28.4 trillion, and Treasury already is shuffling government funds around to continue paying the bills.

Republicans use the issue as a way to hammer the ruling party on its spending, and the Obama-era impasse saw the country come the closest it had ever been to defaulting.

In the aftermath of that conflict in 2011, the United States lost its coveted "AAA" debt rating from Standard and Poor's which sent shockwaves through the markets.

The showdown comes as Democrats are working to pass two massive spending bills – the eight-year, US$1.2 trillion infrastructure package and a 10-year, US$3.5 trillion package with a host of social programs, largely paid for by rolling back tax cuts. (AFP)