White House warns of ‘severe damage’ to US economy as debt limit clash lingers
White House economists have warned that a prolonged debt default would wipe out more than eight million US jobs and cause the country's stock market to lose half of its value as lawmakers continue to quarrel over raising the debt ceiling.
“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,” the White House Council of Economic Advisers emphasized in a blog post on Wednesday.
The report by the economic advisers estimates the impact of a potential breach under three scenarios: brinksmanship, a short default and a protracted default.
It insists that even a brinksmanship scenario -- in which a default is avoided -- would wipe out 200,000 jobs in the country and knock off 0.3 percentage points in the annual GDP (gross domestic product).
In a short default, the economists further argue, the economy would suffer the loss of nearly half a million jobs and the unemployment rate would climb by 0.3 percentage points.
The White House economic team then underlines that the worst-case scenario would be a “protracted” default that will end up wiping out 8.3 million US jobs, plunging the GDP by 6.1 percentage points and causing the stock market to crash by nearly one-half.
The unemployment rate in such a scenario, they argue, would surge by five percentage points.
US Treasury Secretary Janet Yellen has repeatedly warned that the country could default on its debt as soon as June 1 if Congress does not act in time to raise the debt ceiling.
A White House spokesperson cited in a CNN report further noted that the protracted default scenario envisions a three-month long deadlock.
According to the report, the White House projections are identical to ones those released by Moody’s Analytics, which warned in March that a lengthy default could lead to the loss of more than seven million jobs.
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