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VOL. 128 | NO. 194 | Friday, October 04, 2013

US Treasury Warns of Harm From Debt Default

MARTIN CRUTSINGER | AP Economics Writer

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WASHINGTON (AP) – The U.S. Treasury Department is warning that the economy could plunge into a downturn worse than the Great Recession if Congress fails to raise the federal borrowing limit and the country defaults on its debt obligations.

A default could cause the nation's credit markets to freeze, the value of the dollar to plummet and U.S. interest rates to skyrocket, according to the Treasury report released Thursday.

Treasury officials hope by laying out potential consequences they will be able to bring pressure on Congress to act. Treasury Secretary Jacob Lew has said he will have used up the extraordinary measures to avoid breaching the debt ceiling by Oct. 17. After that, the government will have around $30 billion of cash on hand.

The report looked at the disruptions caused to financial markets during a similar stand-off between the administration and Congress over raising the debt limit. It then made projections about what could occur if there were an actual default.

In August 2011, Congress eventually raised the nation's borrowing limit before a default occurred but only after a protracted debate. The politics that nearly led to a default prompted Standard & Poor's to cut the nation's credit rating by a notch.

"As we saw two years ago, prolonged uncertainty over whether our nation will pay its bills in full and on time hurts our economy," Lew said in a statement. "Postponing a debt ceiling increase to the very last minute is exactly what our economy does not need – a self-inflicted wound harming families and businesses."

Copyright 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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RECORD TOTALS DAY WEEK YEAR
PROPERTY SALES 95 460 14,043
MORTGAGES 101 520 16,304
FORECLOSURE NOTICES 0 0 0
BUILDING PERMITS 198 1,098 29,161
BANKRUPTCIES 48 285 9,323
BUSINESS LICENSES 26 123 4,603
UTILITY CONNECTIONS 45 277 10,236
MARRIAGE LICENSES 18 96 3,352

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