Under a « protracted default scenario, » the U.S. could eradicate more than 8 million jobs, according to a May report by the White House Council of Economic Advisers.
The June 1 deadline for raising or suspending the United States government’s $31.4 trillion debt ceiling is fast approaching. A failure by Republicans and Democrats to reach a fiscal resolution—to impede the nation from a “protracted” default on its debt—could eradicate more than 8 million jobs from the U.S. economy, according to a May report by the White House Council of Economic Advisers (CEA).
“There is broad consensus amongst economists that such an event would generate an entirely-avoidable economic catastrophe,” the report states.
Analysis by the CEA compared the potential economic repercussions of a debt ceiling breach to the December 2007 to June 2009 financial crisis. During the Great Recession, 8.7 million American jobs were lost, and unemployment peaked at 10% in October 2009.
White House economists predict that a protracted default—lasting longer than three months—would cause the economy to contract by 6%. Forty-five percent of the stock market’s value would also be wiped out.
Unlike the Great Recession and Covid-19 economic recovery efforts, the report states, “Without the ability to spend on counter-cyclical measures, such as extended unemployment insurance, Federal and state governments would be hamstrung in responding to this turmoil and unable to buffer households from the impacts.
