If the US debt ceiling is not raised, 6 million jobs could be lost

If the US debt ceiling is not raised, 6 million jobs could be lost

If the US debt ceiling is not raised, the unemployment rate would rise from 5.2% to 9%.

Photo: Frederic J. BROWN / AFP / Getty Images

Failure to raise the cap or limit on the amount of money the United States government can borrow could result in one of the largest stock market crashes in history and make trillions of dollars disappear from citizens’ wealth, Moody’s Analytics said in a report.

Congress has a few weeks to avoid that, but there hasn’t been much progress so far.

Democrats are pushing their own bill to suspend the debt limit, which would allow the government to continue to borrow money and pay its bills.

But Republican lawmakers have made it clear that they will not support such legislation.. And since there are few Democrats in the Senate, any dissent within their ranks could kill that bill.

Treasury Secretary Janet Yellen has warned that the government will peak in mid-October. If the cap is not raised by then, the country will face catastrophic economic consequences, Business Insider reported.

The Moody’s Analytics team’s calculations show a US debt default driving a recession similar to that seen during the Great Recession. Gross domestic product would decline by almost 4%. The country would lose almost 6 million jobs, so the unemployment rate would increase from 5.2% to 9%.

This would cause stock prices to plummet by a third to their worst. The market crash would quickly wipe $ 15 trillion in wealth from families.

If legislators cannot raise or suspend the debt limit … the resulting chaos in global financial markets will be hard to bear“Said Moody’s economists, adding that the US and world economies still have a long way to go to recover from the COVID-19 recession.

Last week, the White House told state and local governments that if the debt ceiling were not increased, they would have to make sharp cuts in the federal support that states receive. Programs ranging from free school lunches to Medicaid would have a funding freeze. Also, the country would likely enter a recession when state governments are forced to balance their budgets and cut jobs.

The discussion to increase the debt ceiling is still going on in the Senate.

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