More than 200 top U.S. economists warned congressional leaders Thursday that a failure to raise the debt ceiling would likely spark a devastating economic crisis, rattling global financial markets and killing jobs nationwide.
“The economic consequences of a federal default are unpredictable, but frightening,” the economists warned in a letter to House Speaker Kevin McCarthy (R-Calif.), House Minority Leader Hakeem Jeffries (D-N.Y.), Senate Majority Leader Chuck Schumer (D-N.Y.), and Senate Minority Leader Mitch McConnell (R-Ky.).
“A swift and severe economic downturn could follow, with unnecessary layoffs across the economy,” the experts wrote. “Chaos in world financial markets is highly likely. Higher borrowing costs for the federal government, and indeed for all Americans, could remain with us for a long time—an unwanted legacy of a foolish decision. We should not run the experiment.”
The list of letter signatories includes Joseph Stiglitz, a recipient of the Nobel Memorial Prize in Economic Sciences, as well as former Federal Reserve Vice Chair Roger Ferguson, former Labor Secretary Robert Reich, Groundwork Collaborative chief economist Rakeen Mabud, and former Fed Chair Ben Bernanke.
“We have a wide range of views on economic policies, some ‘conservative’ some ‘liberal,'” the economists wrote, “but we all agree that Congress should raise the debt limit promptly and without conditions in order to eliminate the risk of default.”
The letter was sent as congressional debt ceiling talks remain at a standstill, with the House Republican majority refusing to drop its push for deep federal spending cuts in exchange for lifting the borrowing limit. In 2011, congressional Republicans leveraged the debt ceiling to push through an austerity measure that—according to one economist—helps explain “why the recovery from the Great Recession was so agonizingly slow.”
The current impasse has forced the Treasury Department to take “extraordinary measures” to prevent the federal government from defaulting on its obligations, which include Social Security and Medicare benefits.
But the department’s actions can only buy lawmakers so much time. Last month, the Congressional Budget Office said the U.S. will default this summer unless a deal is reached to raise the debt limit.
One analysis released during the last congressional debt ceiling standoff in 2021 estimated that a U.S. default would wipe out upwards of $15 trillion in household wealth and eliminate nearly 6 million jobs.
“It’s clear that defaulting on the national debt would not only imperil the progress we’ve made over the past three years toward an equitable and long-lasting recovery, but would also risk a completely avoidable and historically severe economic crisis,” Shayna Strom, president and CEO of the Washington Center for Equitable Growth, said in a statement Thursday.
“Economic research tells us that austerity measures can have negative long-term effects on workers, their families, and the economy,” Strom added. “By raising the federal debt limit, Congress can avoid bringing unnecessary hardship on Americans and the economy and, in doing so, will take another needed step toward ensuring economic growth in the future is stronger, more stable, and more broadly shared.”
