A debt default would result in the loss of more than 8 million jobs and a stock market meltdown, according to White House experts. The worst-case scenario is a “protracted” default, which would result in the loss of 8.3 million jobs, a 6.1 percentage point decline in GDP, and a roughly 50% drop in the stock market.
Five percentage points would be added to the unemployment rate. The economy would suffer greatly as a result, with employment growth shifting from its current pace of solid gains to losses of up to millions.
US Government
Due to the US government‘s average monthly spending of $525 billion, the US economy could enter a recession even if a debt default is not initiated. The Treasury Department has taken exceptional steps to keep paying the government’s debts and prevent a default, but those steps may have run their course by June 2023.
If the borrowing cap isn’t increased or halted, Treasury Secretary Janet L. Yellen warned legislators that the United States would run out of money by June 1.
- A debt default would result in the loss of more than 8 million jobs and a stock market meltdown.
- The Treasury Department has taken exceptional steps to keep paying the government’s debts and prevent a default.
- The prolonged default scenario calls for a three-month deadlock.
Although the debt limit was instituted to improve government efficiency, many decision-makers feel that it has become more trouble than it is worth.
Janet Yellen backed eliminating the debt ceiling in 2021 because the country would be unable to issue new debt and would not have enough money to cover all of its expenses, such as military salaries, bondholder interest and other payments, and retiree benefits. If the United States reaches that point and is unable to pay its bondholders as needed, it may be forced to default on its debt.
According to estimates from the Biden administration, even a brinksmanship scenario in which a default is avoided would result in the loss of 200,000 jobs and a 0.3 percentage point decline in the yearly gross domestic product.
In the event of a brief default, the economy would lose around 500,000 jobs, and the unemployment rate would increase by 0.3 percentage points. The worst-case scenario is a “protracted” default, which would result in the loss of 8.3 million jobs, a 6.1 percentage point decline in GDP, and a roughly 50% drop in the stock market.
According to a White House spokesman, the prolonged default scenario calls for a three-month deadlock. Last month, Moody’s Analytics issued a warning that a protracted default might cost more than 7 million jobs.
