As Washington decries on raising the debt limit, the White House is taking a quiet look at the real-world impact of the default.
White House economists warned in a report released Wednesday that if lawmakers fail to raise the federal debt limit before the government runs short of money to cover its bills, it could lead to a global financial crisis. which the United States would be powerless to face.
“A default would send shock waves through global financial markets and could cause credit markets around the world to freeze and stock markets to collapse,” officials from the White House Council of Economic Advisors warned. “Employers around the world will probably have to start laying off workers.”
The prospect of an upcoming global recession, he wrote, could be worse than the 2008 financial crisis, as countries continue to struggle to survive the COVID-19 pandemic. Adding to the burden, Congress and President Biden will be unable to spend money to prop up the economy unless the debt limit, which limits the amount the US can borrow, is raised.
“The federal government can only stand back,” he wrote, “helpless to address the economic crisis.”
Mr Biden and Democratic leaders in Congress are engaged in a growing standoff with Senate Republicans who agree the debt limit should be raised in the coming weeks to avoid default, but who withhold an up or down vote to do so. are. Republicans want Democrats to use a special process in the Senate to bypass their filibuster, which Democrats have opposed. Mr Biden has called the actions of Republicans irresponsible and tried, and failed, to shame them into voting.
The report, released Wednesday, offered a detailed and near-apocalyptic rundown of the White House fears of how debt defaults would come — which would come when the government would be unable to pay all those who had a Money owed at once – will ripple through the economy.
Officials have warned that the threat of a default in 2011 also raised mortgage rates for home buyers for months, and an actual default could raise them even further this time. They also say that retirees, Medicare beneficiaries, members of the military and millions of others who depend on federal payments can cut their means of support “quickly, in some cases even overnight.” Huh.”
They also say that some important federal services – such as forecasts from the National Weather Service or timings from the National Institute of Standards and Technology – may be disrupted due to lack of funding.
Mr Biden continues to pressure Republicans to allow Democrats to approve a debt-limit increase along party lines in the Senate. Barring this, Democrats in Congress would be forced to move escalation through a budget reconciliation process that skips a filibuster, or moves to eliminate filibuster for a vote.
The administration has denied unilateral attempts to circumvent the limit, such as coining a $1 trillion coin, saying such efforts would sow uncertainty that would hurt the economy.