Ahead Of Biden's Meet With Congressional Leaders, White House Warns Protracted National Debt Default Could Cost Millions Of Jobs

The White House, in a blog, has warned that an actual breach of the debt ceiling would likely cause severe damage to the U.S. economy and that a protracted default would likely lead to millions of job losses.

What Happened: The blog said, "In other words, defaulting on our government's debt could reverse the historic economic gains that have been achieved since the president took office: an unemployment rate near a 50-year low, the creation of 12.6 million jobs, and robust consumer spending that has consistently powered a solid, reliable growth engine, supported by paychecks from the strong job market and healthy household balance sheets."

Bloomberg had reported the story earlier.

Also Read: Best Penny Stocks

The costs would be even greater under a protracted default, it said, adding that a CEA simulation of the effect of a protracted default shows an immediate, sharp recession on the order of the Great Recession.

The warning comes days ahead of President Joe Biden's meeting with top congressional leaders on May 9. The White House stated that because the government would be unable to enact counter-cyclical measures in a breach-induced recession, there would be limited policy options to help buffer the impact on households and businesses.

"The ability of households and businesses, especially small businesses, to borrow through the private sector to offset this economic pain would also be compromised. The risks engendered by the default would cause interest rates to skyrocket, including those on the financial instruments that households and businesses use — Treasury bonds, mortgages, and credit card interest rates," it said.

The blog cited examples of how the market has began reflecting signs of stress due to the ongoing impasse. Yields on Treasury bills with maturity dates around the X-date have increased considerably, it said, and added that the cost of insuring U.S. debt has also risen substantially, hitting an all-time high.

Read Next: Gold Rush: Bullion Tracks Record-High Prices After Fed Indicates Pause