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There is no historical precedent for the U.S. Potential impacts of approaching the debt ceiling The risks engendered by the default would cause interest rates to skyrocket, including those on the financial instruments that households and businesses use-Treasury bonds, mortgages, and credit card interest rates. The ability of households and businesses, especially small businesses, to borrow through the private sector to offset this economic pain would also be compromised. In other words, defaulting on our government’s debt could reverse the historic economic gains that have been achieved since the president took office: an unemployment rate near a 50-year low, the creation of 12.6 million jobs, and robust consumer spending that has consistently powered a solid, reliable growth engine, supported by paychecks from the strong job market and healthy household balance sheets.īecause the government would be unable to enact counter-cyclical measures in a breach-induced recession, there would be limited policy options to help buffer the impact on households and businesses. Table 1: Estimated Economic Effects of Debt Ceiling Standoff: Q3 2023

A protracted default would likely lead to severe damage to the economy, with job growth swinging from its current pace of robust gains to losses numbering in the millions.

government were to default on its obligations-whether to creditors, contractors, or citizens-the economy would quickly shift into reverse, with the depth of the losses a function of how long the breach lasted. Analysis by CEA and outside researchers illustrates that if the U.S. debt ceiling would likely cause severe damage to the U.S. Real time data, shown below, indicate that markets are already pricing in political brinkmanship related to Federal government default through higher risk premia.Īn actual breach of the U.S. debt ceiling could cause significant disruptions to financial markets that would damage the economic conditions faced by households and businesses. Department of the Treasury suggest the United States is rapidly approaching the date at which the government can no longer pay its bills, also known as the “X-date.” History is clear that even getting close to a breach of the U.S. New analyses by both the Congressional Budget Office and the U.S.