Hitting Debt Ceiling Could Trigger US Recession - White House
Sumaira FH 1 month ago Fri 17th September 2021 | 08:04 PM
The US economy could fall into recession if Congress does not reach a deal to raise the country's debt limit, the White House warned in a memo widely circulated on Twitter on Friday
WASHINGTON (UrduPoint News / Sputnik - 17th September, 2021) The US economy could fall into recession if Congress does not reach a deal to raise the country's debt limit, the White House warned in a memo widely circulated on Twitter on Friday.
"Hitting the debt ceiling could cause a recession," read the memo, which cautioned about the consequences of failing to lift the federal borrowing limit. "Economic growth would falter, unemployment would rise, and the labor market could lose millions of jobs."
Negotiations on the debt ceiling between Democrat lawmakers and their Republican rivals have dragged on for months, with no immediate solution in sight. Democrats and Republicans have squared off over the debt ceiling several times over the past decade and briefly allowed the United States to surpass it during the Trump administration.
Treasury Secretary Janet Yellen has warned over the past two months that the United States could run out of money by October to service its debt and that dire consequences awaited the world's largest economy should it default on the payment of its borrowings.
The White House memo expanded on those concerns, listing multiple public spending programs that could come to a halt in the event of a debt default. Programs at risk included disaster relief, child nutrition, public health, education, infrastructure spending estimated at $100 billion a year and the national insurance facility Medicaid, which provides about $500 billion annually in cover.
The Treasury has already suspended fully or partly investments in the Civil Service Retirement and Disability Fund, the Postal Service Retiree Health Benefits Fund and a section of the Federal Employees Retirement to free up funds to service the national debt, Yellen announced in August. These were flexible investments that could be made in due course, and other US treasury secretaries have also suspended them as well in times of emergency, she said.
The US economy briefly fell into recession after the outbreak of the coronavirus pandemic last year and has been recovering since, posting a growth of 6.5% in the second quarter of 2021 after a decline of 3.5% for all of 2020.