Economists warn of worst-case outcomes should Congress fail to raise the federal borrowing limit by the “X-date” deadline.
by the Treasury Department found the 2011 debt ceiling standoff caused a $2.4 trillion decline in total household wealth. The broader economy, the White House Council of Economic Advisers said, could contract by as much as 6 percent, similar to the 2008 Great Recession.The U.S.
If the government can still make some payments with incoming tax revenue, the administration might have to pick between sending checks to seniors and making interest payments on the debt. But forgoing those interest payments to keep Social Security and Medicare functioning could exacerbate what would likely be an already severe financial crisis in that doomsday scenario.
Economists fear that would dramatically increase the ranks of the countries drowning in debt, like Sri Lanka and Pakistan, with a potential rise in protests and global geopolitical instability. The Federal Reserve’s push to raise interest rates over the past year to curb inflation has already eroded the value of U.S. bond holdings for many nations. And according to the Council on Foreign Relations, more than half of the world’s foreign currency reserves are held in U.S.
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