"A recent analysis by Moody’s, using a different model of the macroeconomy, arrived at a similar conclusion. They predict that under a clean debt ceiling increase, job growth continues over the next few quarters, adding 900,000 jobs," the CEA said on the website.
"But under a protracted default scenario, job losses amount to almost 8 million, an extremely stark difference of similar magnitudes to our own modeling."
The CEA noted that "without the ability to spend on counter-cyclical measures such as extended unemployment insurance, Federal and state governments would be hamstrung in responding to this turmoil and unable to buffer households from the impacts."
In this scenario, "neither would households be able to borrow through the private sector as the interest rates on the financial instruments that households and businesses use — Treasury bonds, mortgages, and credit card interest rates — would skyrocket due to risks of an uncertain future."
"While policy makers have thus far, in the long history of our Nation, avoided inflicting such damage on the American and even global economies, virtually every analysis we have seen finds that default leads to deep, immediate recessionary conditions," the statement read.
"Economists may not agree on much, but when it comes to the magnitude of risks invoked by closely approaching or breaching the debt ceiling, we share this deeply troubling consensus."
The US Treasury Department in January notified Congress it started using "extraordinary measures" to keep the federal government from defaulting on its debts. In December 2021, Congress increased the statutory debt limit to about $31.381 trillion.
The Biden administration wants Congress to raise the debt ceiling without attaching other economic policy proposals. However, House Speaker Kevin McCarthy (R-CA) has said that a "no-strings-attached" debt limit increase will not pass the lower chamber.
Last week, House Republicans passed the Limit, Save, Grow Act, which would raise the United States’ debt ceiling and reduce the deficit by cutting government spending. The bill would also recover unspent COVID-19 relief funds.
The US government will likely begin defaulting on its debt by June 1 if the congressional limit on the country’s debt servicing is not raised by then, Treasury Secretary Janet Yellen said in a letter to McCarthy.