The Cost of Going Off the Cliff
Bloomberg Businessweek US|January 30, 2023
Bloomberg Economics has modeled the effects of a protracted debt ceiling standoff—and they’re horrendous
David Wilcox
The Cost of Going Off the Cliff

Through wars, recessions, depressions and the pandemic, the US has benefited from Treasury debt being the closest thing in the markets to risk-free. Now that hard-earned reputation may be shoved over the edge of a very tall cliff.

Fights over the government debt ceiling have become routine in Washington throughout the past quarter-century. This one promises to be especially dangerous, partly because of commitments Kevin McCarthy is said to have made to far-right lawmakers seeking deep budget cuts in exchange for their support of his becoming speaker of the House.

Even a short-lived halt in Treasury payments-whether interest owed to bondholders, salaries for federal workers or benefits to Social Security recipients-would elicit a swift and potentially devastating market reaction. Stock prices would plunge and borrowing rates would spike. A full-blown financial crisis cannot be ruled out.

The fallout from a monthslong standoff would be even more dire, with gross domestic product plummeting faster than at any time other than the second quarter of 2020, when much of the economy was shuttered in response to Covid-19. There's also a risk that millions could be thrown out of work. Over the longer term, damaged investor confidence and the resulting increase in US borrowing costs would exact a continuing toll.

On Jan. 19, Treasury Secretary Janet Yellen announced that the country had hit the current debt limit of $31.4 trillion and that she had begun resorting to "extraordinary measures." The use of accounting maneuvers such as deferring contributions to pension funds for civil service employees would allow the Treasury to continue making payments outside the government in full and on the normal schedule for a limited period of time. Yellen told Congress earlier this month that she expects funds to hold up at least through early June. Some analysts say she could keep the dance going until July or even later.

Bu hikaye Bloomberg Businessweek US dergisinin January 30, 2023 sayısından alınmıştır.

Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.

Bu hikaye Bloomberg Businessweek US dergisinin January 30, 2023 sayısından alınmıştır.

Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.

BLOOMBERG BUSINESSWEEK US DERGISINDEN DAHA FAZLA HIKAYETümünü görüntüle
Instagram's Founders Say It's Time for a New Social App
Bloomberg Businessweek US

Instagram's Founders Say It's Time for a New Social App

The rise of AI and the fall of Twitter could create opportunities for upstarts

time-read
4 dak  |
March 13, 2023
Running in Circles
Bloomberg Businessweek US

Running in Circles

A subscription running shoe program aims to fight footwear waste

time-read
3 dak  |
March 20 - 27, 2023
What I Learned Working at a Hawaiien Mega-Resort
Bloomberg Businessweek US

What I Learned Working at a Hawaiien Mega-Resort

Nine wild secrets from the staff at Turtle Bay, who have to manage everyone from haughty honeymooners to go-go-dancing golfers.

time-read
10 dak  |
March 20 - 27, 2023
How Noma Will Blossom In Kyoto
Bloomberg Businessweek US

How Noma Will Blossom In Kyoto

The best restaurant in the world just began its second pop-up in Japan. Here's what's cooking

time-read
3 dak  |
March 20 - 27, 2023
The Last-Mover Problem
Bloomberg Businessweek US

The Last-Mover Problem

A startup called Sennder is trying to bring an extremely tech-resistant industry into the age of apps

time-read
10+ dak  |
March 20 - 27, 2023
Tick Tock, TikTok
Bloomberg Businessweek US

Tick Tock, TikTok

The US thinks the Chinese-owned social media app is a major national security risk. TikTok is running out of ways to avoid a ban

time-read
10+ dak  |
March 20 - 27, 2023
Cleaner Clothing Dye, Made From Bacteria
Bloomberg Businessweek US

Cleaner Clothing Dye, Made From Bacteria

A UK company produces colors with less water than conventional methods and no toxic chemicals

time-read
3 dak  |
March 20 - 27, 2023
Pumping Heat in Hamburg
Bloomberg Businessweek US

Pumping Heat in Hamburg

The German port city plans to store hot water underground and bring it up to heat homes in the winter

time-read
3 dak  |
March 20 - 27, 2023
Sustainability: Calamari's Climate Edge
Bloomberg Businessweek US

Sustainability: Calamari's Climate Edge

Squid's ability to flourish in warmer waters makes it fitting for a diet for the changing environment

time-read
4 dak  |
March 20 - 27, 2023
New Money, New Problems
Bloomberg Businessweek US

New Money, New Problems

In Naples, an influx of wealthy is displacing out-of-towners lower-income workers

time-read
4 dak  |
March 20 - 27, 2023