By Shanthi Rexaline

As the government and Republic lawmakers work overtime to settle the debt ceiling issue amicably, noted economist and gold bull Peter Schiff said a resolution alone will not work wonders for the U.S.

US economist, Peter Schiff looks on as he attends the annual Krynica Economic Forum -known as the ‘Davos of the East’- on September 11, 2009. The 19th Krynica Economic Forum opened on September 9 in southern Poland, under the theme of European Solidarity 20 years after the revolution. BARTEK WRZESNIOWSK/BENZINGA

“According to Democrats and President Biden, America’s prosperity hinges on the ability of the Federal Govt. to go deeper into debt. In truth, the best chance we have of preserving prosperity is to not raise the debt ceiling, cut government spending, and finally start paying our bills,” Schiff said in a tweet.

The debt ceiling is not unconstitutional, but the president invoking the 14th Amendment to circumvent it is, Schiff said.

“If Biden wants to pay the debt without raising the ceiling, he must balance the budget,” he added.

Schiff’s views are in line with the Republican philosophy of falling back on spending cuts to balance the budget. GOP lawmakers want spending cuts to be part of the bill to raise the debt ceiling.

On the contrary, the Biden administration is eyeing bringing in additional revenue sources such as through taxing the richest, as a means of bringing fiscal disciple.

Before heading to Japan for the G7 meeting, Biden said he is confident of breaking the debt ceiling impasse, thereby avoiding an unprecedented and potentially catastrophic default.

A select group of negotiators from both sides is set to discuss a speedy resolution to the crisis at hand.

Schiff claims the new Great Depression will be a different as the average American loses purchasing power as prices continue to rise.

“It’s probably going to be worse. It is a depression, but unlike the depression of the 1930s, where the people at least got the benefit of falling prices that provided some relief,” Schiff said about the negotiations. “This time, even the people who don’t lose their jobs are going to suffer because they’re going to lose the value of their paychecks.”

Speaker of the House Kevin McCarthy will not resume negotiation until Biden returns from the G-7 summit as negotiations failed on Friday between the Speaker’s aides and the Biden administration. 

Schiff criticized Federal Reserve Chairman Jerome Powell’s move on raising the interest rates. The current inflation rate stands at 4.93%.

“Interest rates are prices. It’s the price you pay when you borrow money. The price is going up, just like the price of everything else,” Schiff said about the high interest rates. He remarked that “as interest goes up, well, that’s just another cost that you need to pass on to your customers through higher prices.

Produced in association with Benzinga

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