The White House Council of Economic Advisers has released a report warning of the dire economic consequences that could result from a default on U.S. payment obligations. The report suggests that a protracted default could cause the loss of 8.3 million jobs and a 6.1% reduction in economic output, which would have devastating consequences for the economy.
Such an unprecedented default would likely cause severe damage to the economy, with job growth swinging from its current pace of robust gains to losses numbering in the millions. The potential ramifications are significant, emphasizing the urgent need for measures to prevent such an outcome.
The report also warns that even a brief default scenario that is resolved quickly could still result in significant economic repercussions, including the potential loss of 500,000 jobs and a 0.6% reduction in real GDP. These findings illustrate the urgent need for action to avoid any default scenario and underscore the critical importance of ensuring that the U.S. remains a reliable borrower in the eyes of the global financial community.
While negotiations around the debt ceiling can be politically contentious, the economic consequences of a default are simply too severe to be ignored. Policymakers must take steps to ensure that the United States is able to meet its payment obligations, maintain its financial credibility, and avoid any potential economic catastrophe.
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