White House economists warned on Wednesday that a protracted debt default would cause the loss of more than 8 million jobs and cut the stock market in half.
The new projections, published in a blog post by the White House Council of Economic Advisers, make clear the enormous stakes behind a potential breach of the debt ceiling.
“A protracted default would likely lead to severe damage to the economy, with job growth swinging from its current pace of robust gains to losses numbering in the millions,” the White House economists said.
Treasury Secretary Janet Yellen said the US could default on its debt as soon as June 1 if Congress doesn’t act.
The report estimates the impact under three scenarios: brinksmanship, a short default and a protracted default.
Even a brinksmanship scenario, where a default is avoided, would wipe out 200,000 jobs and knock 0.3 percentage points off annual gross domestic product, according to the Biden administration.
In a short default, the economy would suffer the loss of about half a million jobs and the unemployment rate would rise by 0.3 percentage points.
The White House economists say the worst-case scenario is a “protracted” default that wipes out 8.3 million jobs, plunges GDP by 6.1 percentage points and sends the stock market crashing nearly in half. The unemployment rate, in that situation, would spike by five percentage points.
A White House spokesperson said the protracted default scenario envisions a three-month long impasse.
The White House projections are similar to ones made by Moody’s Analytics, which warned in March that a lengthy default could cost more than 7 million jobs.