Gregory Daco, an economist at EY Parthenon, said this week that without an increase in the debt ceiling or a freeze on the debt ceiling when the extraordinary measures ended, the output of the economy in the United States could be reduced by 5 percent. Such a slowdown could seriously damage the economy, which is expected to grow slowly this year.
“Treasury must balance the federal budget by ensuring that the government’s spending is equal to the government’s income,” said Mr. Daco, predicting that such a situation would lead to “a recession” and “a serious disruption of the financial market.”
Ms. Yellen has dismissed proposals to raise the borrowing cap unilaterally, such as creating a $1 trillion bond, as fantasy.
Some anti-debt campaigners hope that as X-day approaches, enough Republicans will come back from the brink of default.
“Although no one knows what will happen if you breach the credit limit, not many people would think that good things happen afterwards,” said Christopher Campbell, who was the assistant secretary of the Treasury for financial institutions from 2017 to 2018. explaining how it happens.”
Mr. Campbell, a former chairman of the Senate Finance Committee Republicans, added: “At the end of the day, I think good leaders are going to have to deal with this problem.”
White House officials, however, have begun privately looking at other ways to raise the limit, including a measure — which could take months — to force a vote on the Democratic-backed debt hike. He did not say he was confident Republicans would bow to negotiations, though he has repeatedly said he hopes Congress will repeal the limits.
Mrs. Jean-Pierre also said on Wednesday that Mr. Biden would not discuss the debt increase. Asked if he believed Republicans felt it was their responsibility to raise the border and avoid instability, he said, “They should.”