Nobel economist Paul Krugman says the possibility of a US default is very real, and the debt ceiling should be abolished as it gives extremists an issue to 'weaponize'

• The risk of the US defaulting on its debt is very real, top economist Paul Krugman warned.
• He said the debt ceiling should be abolished, as it gives Republicans a "choke point" on fiscal policy.

The US could be inching closer to default, and the debt ceiling should be abolished, according to Nobel laureate Paul Krugman.

"The possibility that the federal government will soon be unable to finance its normal operations has become very real," he warned in an op-ed for the New York Times on Sunday.

But the state of America's finances isn't as bad as other countries who have defaulted on their debt, like Greece in 2009, Krugman said.

"If it happens, it will be because Republicans in the House are trying to use the debt ceiling to extort policy concessions they would have no chance of enacting through the normal legislative process," he added.

Building on previous columns, he further detailed the merits of backdoor measures the Biden administration could take to avoid default.

One is minting a $1 trillion coin to deposit at the Federal Reserve, and another is issuing premium bonds, which are debt securities that are sold for higher than face value. In effect, both measures would allow the government to borrow more, even if lawmakers fail to lift the debt ceiling.

That comes as the deadline for the US defaulting on its debt ticks closer, with Treasury Secretary Janet Yellen estimating that the government ran out of cash as soon as June 1. Failing to do so in time could spark a financial crisis, experts have warned, upping the stakes as policymakers continue to spar under which conditions to raise the debt limit.

Krugman noted that even if the US sold premium bonds for more than face value, it wouldn't be the first country that manipulated its debt. Until 2015, part of the UK's debt consisted of bonds that paid a coupon but never matured, meaning they had no par value, he said.

"You might ask how we're supposed to enforce a debt ceiling if the government can play games with the definition of debt. But the answer, of course, is that we shouldn't have a debt ceiling. The government should make decisions bout taxing and spending, and consider the fiscal consequences, without creating an additional choke point that extremists can weaponize," he added.