Treasury Warns Of Debt Ceiling Crisis’ Economic Impact

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Jacquelyn Martin / Associated Press

A statue of former Treasury Secretary Albert Gallatin stands outside the Treasury Building in Washington.

With less than two weeks remaining for Congress to raise the debt limit, the Treasury Department released a report Thursday revisiting the economic impact of the 2011 debt ceiling crisis, which sent financial markets into a tailspin and slowed economic growth.

The current $16.999 trillion debt limit was reached in May, but Treasury has used creative financing to keep the government functioning normally at that cap. Those measures won’t be enough for the United States to meet its obligations come Oct. 17, Treasury Secretary Jack Lew informed Congress earlier this week.

Warning of “a large, adverse, and persistent financial shock” this time around, Treasury highlighted the impact of lower consumer confidence, slower hiring, and increased market volatility after Congress came close to not raising the borrowing cap in 2011. “Between the second and third quarter of 2011, household wealth fell $2.4 trillion,” the department wrote. “[L]ower stock prices reduce retirement security – from the second to the third quarter of 2011, retirement assets fell $800 billion.”

Treasury warned that the current government shutdown puts the nation’s economic outlook at risk, something that would be exacerbated by another drawn-out debate over raising the borrowing limit. “We may be starting to see some tentative signs that the current debate is affecting financial markets,” the department wrote.

And if Congress does not raise the debt limit, raising the possibility of default if the government is unable to meet its bond obligations, Treasury said the results could be worse than the 2008 “Great Recession.”

“In the event that a debt limit impasse were 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—with many private-sector analysts believing that it would lead to events of the magnitude of late 2008 or worse, and the result then was a recession more severe than any seen since the Great Depression,” the report states.

The full report is below:

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14 comments
benth166
benth166

Hey Jack,

Yada, yada, yada, yada Yada, yada, yada, yada Yada, yada, yada, yada Yada, yada, yada, yada Yada, yada, yada, yada Yada, yada, yada, yada Yada, yada, yada, yada Yada, yada, yada, yada Yada, yada, yada, yada Yada, yada, yada, yada Yada, yada, yada, yada Yada, yada, yada, yada Yada, yada, yada, yada Yada, yada, yada, yada Yada, yada, yada, yada Yada, yada, yada, yada !!!!!

We are so tired of your BS mister, and all the rest of crap coming out of the treasury, we view it all now as just so much propaganda to manipulate the markets and us.

My advice for our stupid, (This is way beyond ignorance) Congressional Representative;  STOP THE GD SPENDING YOU IDIOTS.  What part of BROKE do you morons not understand.  There is no more money to fill your Pork Barrels, let alone the War Machine.  it is now time for the Military Industrial and Banking Industry to take the hit.

carltcc
carltcc

The economy is imploding right now. People working less hours. The debt ceiling "crisis" is more of a danger to the future of the dollar. Eventually foreign holders of dollars will realize that the US will never get its financial house in order. Foreigners will dump the dollar as the world reserve currency. America will become a bankrupt third world country.

MrObvious
MrObvious

There's data and then there's faith.

We got a bunch of faithful tea billies that are entirely immune to facts.

MrObvious
MrObvious

@carltcc 

So since the 'economy is imploding' then just shoot it in the head and restart?

jsfox
jsfox

@carltcc Psst not if the Republicans decide to act responsibly. And next repeat after me: The US cannot go bankrupt. 

And we had our financial house in order than Bush 2 came along. And now we are slowly ever so slowly getting financial house in order that's assuming the Republicans don't screw it up again.

thehead
thehead

@MrObvious which item of the tea party platform do you disagree with?

carltcc
carltcc

@MrObvious Nothing like the ignorance of liberals. Only the ignorant about economics would be Obama supporters.

tom.litton
tom.litton

@thehead @MrObvious I disagree with much of the tea party platform, however, i don't have much problem with most of it.

What i have a problem with is the tea party congressmen thinking that scuttling a key reform that democrats have spent decades trying to enact is a fair concession in exchange for stopping doing harm to the economy.   It basically announces they couldn't care less about the economy and people's jobs.  

What i have a problem with is tea party congressmen ignoring economic and scientific facts in favor of their gut feeling (which is only slightly better than blind faith).

MrObvious
MrObvious

@thehead @MrObvious 

The one where if you don't have political power to change or pass laws extort the economy to get your way. Is it in there?

jsfox
jsfox

@carltcc @MrObvious You cannot be serious. You are going to tell me you actually believe Republicans understand economics? You mean the party that has never been good for the economy as a whole. You mean the party that through their policies started the middle class slide? You mean the Party that took us from a creditor nation to a debtor nation? You mean the party that came into power with a budget surplus and blew it on two unpaid for tax cuts, two unpaid for and off the books wars (one based on an outright lie) and the largest unfunded entitlement increase in our history. You think that party gets economics. I can barely breath I am laughing so hard.

MrObvious
MrObvious

@carltcc @MrObvious

Nothing like the ignorance of liberals. Only the ignorant about economics would be Obama supporters.

So you disagree with the data? Is your argument that nothing will come from a default? I see you got the faith.