Raise the debt ceiling or face a “scary” crisis

More than 200 leading U.S. economists warned congressional leaders on Thursday that a failure to raise the debt ceiling would likely trigger a devastating economic crisis, shaking global financial markets and killing jobs across the country.

“The economic consequences of a federal default are unpredictable, but frightening,” economists warned in a letter Speaker of the House Kevin McCarthy (R-Calif.), House Minority Leader Hakeem Jeffries (DN.Y.), Senate Majority Leader Chuck Schumer (DN.Y.) and Leader of Senate Minority Mitch McConnell (R-Ky.).

“A rapid and severe economic downturn could ensue, with unnecessary layoffs across the economy,” the experts wrote. “Chaos in global financial markets is very likely. Higher borrowing costs for the federal government, and indeed for all Americans, could stay with us for a long time – an unwanted legacy of a foolish decision. should not conduct the experiment.”

The list of letter signatories includes Joseph Stiglitz, winner of the Nobel Prize in Economics, as well as former Federal Reserve Vice Chairman Roger Ferguson, former Secretary of Labor Robert Reich, chief economist of Groundwork Collaborative Rakeen Mabud and former Fed Chairman Ben Bernanke. .

“We have a wide range of views on economic policy, some ‘conservative’ some ‘liberal’,” the economists wrote, “but we all agree that Congress should raise the cap on the debt quickly and without conditions in order to eliminate the risk of default.

The letter was sent as talks on the Congressional debt ceiling remain stalled, with the Republican majority in the House refusing to drop its push for deep federal spending cuts in exchange for lifting the borrowing limit. In 2011, Republicans in Congress leveraged the debt ceiling to push through an austerity measure that…according an economist – helps explain “why the recovery from the Great Recession has been so painfully slow”.

The current impasse has forced the Treasury Department to take “extraordinary measures“to prevent the federal government from defaulting on its obligations, which include Social security and health insurance benefits.

But the ministry’s actions can’t buy lawmakers much time. Last month, the Congressional Budget Office said the United States will default this summer unless an agreement is reached to raise the debt ceiling.

An analysis released during the last standoff on the Congress debt ceiling in 2021 estimated that a US default would wipe out more than $15 trillion in household wealth and eliminate nearly 6 million jobs.

“It is clear that a default on the national debt would not only jeopardize the progress we have made over the past three years towards an equitable and sustainable recovery, but would also risk causing an economic crisis completely avoidable and historically serious,” said Shayna Strom, president and CEO of the Washington Center for Equitable Growth, said in a statement Thursday.

“Economic research tells us that austerity measures can have long-term negative effects on workers, their families and the economy,” Strom added. “By raising the federal debt ceiling, Congress can avoid causing unnecessary hardship to Americans and the economy, and in doing so, will take another necessary step to ensure that future economic growth is stronger, more stable, and more widely shared.

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