White House economists said in a new analysis released Wednesday that an extended breach of the nation’s borrowing limit could wipe out more than 8 million jobs and cause “severe” economic damage, as lawmakers run out of time to resolve the fiscal impasse.
In the report, the White House Council of Economic Advisers compared the potential economic impact of a debt ceiling breach to the 2008 Great Recession, in which economic growth contracts sharply and unemployment surges. The nightmare scenario of a “protracted” standoff over the debt limit — or one that lasts about three months — would lead to a 6 percent contraction in the size of the economy, comparable to the shock of the 2008 recession, the report found. The stock market would also fall by an estimated 45 percent.
The Council of Economic Advisers also warned that less dramatic failures around the debt limit — including “brinkmanship” in which the limit is approached but not breached — could cost hundreds of thousands of U.S. jobs.