The White House warned, on Wednesday, that if the Republican opposition does not back down from its refusal to raise the public debt limit, the United States will witness an economic disaster if it falls into a state of default for a long time.
President Joe Biden’s economic advisors said that if the world’s largest economic power fails to meet its financial obligations on time, and this default is prolonged, the American labor market might lose more than eight million jobs this summer.
They added that if this catastrophic scenario materializes, the gross domestic product would contract by 6%, while the financial markets, for their part, will lose 45% during the third quarter of the year.
However, if the United States witnessed a default for a short period, then the advisors affiliated with the “Council of Economic Advisers” in the White House expect that the US economy will suffer from a rise in unemployment rates and a lower recession.
This issue poses a great risk to the United States, as the country has never found itself in default on its debt.
Republicans refuse to agree to raise the federal public debt limit, which is usually a routine procedure, unless the Democrats first agree to significant spending cuts.
The administration warns that failure to raise the public debt limit will lead to the United States defaulting on its $31.4 trillion debt, in a historical precedent that would shock both the United States and the world.