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A U.S. default would impact everyone in America and could take the nation decades to fully recover, White House economists warned in a report released Wednesday.
The report paints a grim picture of how failure to raise the debt ceiling in time would trigger far-reaching consequences for everyday American families, companies and investors.
Everything from paychecks to military personnel and Social Security benefits to the National Weather Service and maintenance of the U.S. electricity grid could be at risk from a default, White House economists have said.
“The mere threat of default has negative effects on the US economy, and an actual default for any length of time would inflict a devastating blow that would be felt by families, businesses and the economy here. and around the world for decades to come, ”officials from the White House Council of Economic Advisers wrote in the report.
The sobering forecast comes as Wall Street CEOs and other business leaders meet with the White House on Wednesday on the ramifications of a default. The Treasury Department has warned that if Congress does not raise the debt ceiling, it short of cash and extraordinary measures by October 18.
The White House has said tens of millions of people, including families with children, retirees and veterans, could potentially lose access to federal payments. Including:
- 42 million people receiving food stamps
- 60 million children whose parents benefit from child tax credits
- 10 million people benefiting from housing assistance
- 11 million students receiving financial aid
- 30 million children participating in school meal programs
Economists have warned that a US default could trigger an even worse collapse than that caused by the 2008 financial crisis – damaging an economy that has yet to fully recover from Covid-19.
“A default would send shock waves through global financial markets and likely cause credit markets around the world to freeze and stock markets to fall,” White House economists wrote. “Employers around the world should probably start laying off workers. “
More on the report: The report, titled Life After Default, cites simulations performed in the past by the Federal Reserve and the Peterson Foundation as well as a Moody’s Analytics projection that a default could cost America nearly 6 million jobs.
“Added to the damage caused by a default is the fact that the federal government would be tied up to respond to the very economic crisis a default would likely create,” said economists.
The government would likely be unable to implement the relief that helped ease previous recessions, including during the onset of Covid-19.
“Instead, the federal government could only step back,” the economists wrote, “powerless to face the economic maelstrom”.
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