US default could be 'catastrophic': Treasury
- October 4, 2013, 7:43 pm
- World News
- 126 Views
WASHINGTON, Oct 04 (Online): The US Treasury warned Thursday of a disastrous outcome if Congress's refusal to raise the country's borrowing ceiling forces it to default on obligations.
It said that the fallout could include returning to a recession as deep as that of 2008-2009, if the US's borrowing power is not increased by October 17, when it forecasts the government will exhaust its cash and be unable to pay all its bills.
"In the event that a debt limit impasse was to lead to a default, it could have a catastrophic effect on not just financial markets but also on job creation, consumer spending and economic growth," the Treasury said in a report.
"Credit markets could freeze, the value of the dollar could plummet, US 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 warning sent shudders through markets, with US stocks sinking Thursday and Asian indexes opening lower Friday, as Washington passed the third day of a dramatic shutdown due to Congress's stalemate over a new budget.
That battle appeared more and more likely to be subsumed by a tense fight over the debt ceiling, and the Treasury warned strongly against "brinksmanship" that could carry the fight to or past the 17th.
In an op-ed due to appear in USA Today on Friday, Lew expanded on his dire outlook, saying failure to raise the debt-ceiling would have far-reaching consequences across all sectors of American society.
"If the United States cannot pay its bills in full and on time, each and every American will be affected, including seniors who rely on Social Security, veterans who depend on disability payments, children in need of food assistance, and doctors and hospitals who treat Medicare patients, among others," Lew wrote
