The Treasury Department released a new report Thursday morning warning of the catastrophic potential consequences of breaching the debt ceiling, cautioning that it could lead to economic calamity “
more severe than any seen since the Great Depression.”
The report designed to put pressure on Congress to raise the nation’s borrowing limit ahead of an Oct. 17 deadline.
It detailed how even brinkmanship around the debt ceiling could be damaging to markets, consumer and business confidence, and interest rates.
Here’s how the report starts:
The United States has never defaulted on its obligations, and the U. S. dollar and Treasury securities are at the center of the international financial system. A default would be unprecedented and has the potential to be catastrophic: credit markets could freeze, the value of the dollar could plummet, U.S. interest rates could skyrocket, the negative spillovers could reverberate around the world, and there might be a financial crisis and recession that could echo the events of 2008 or worse.
The report also noted that the ongoing government shutdown — currently in its third day — could make the economy even “more susceptible” to a debt-ceiling breach.
The debt ceiling needs to be raised by Oct. 17 to avoid potential default on some U.S. obligations. After that date, the Treasury would have only approximately $US30 billion to meet all of its commitments. On some days, expenditures can go as high as $US60 billion.
President Barack Obama says that he won’t negotiate over raising the debt ceiling, calling it Congress’ responsibility. House Republicans, meanwhile, have insisted on extracting some kind of concession out of Obama in exchange for a debt-ceiling hike.
“Postponing a debt ceiling increase to the very last minute is exactly what our economy does not need — a self-inflicted wound harming families and businesses,” Treasury Secretary Jack Lew said in a statement along with the report.
“Our nation has worked hard to recover from the 2008 financial crisis, and Congress must act now to lift the debt ceiling before that recovery is put in jeopardy.”
Here’s the full report:
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