Economists fear debt ceiling fight may bring recession# Stock
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http://money.cnn.com/2013/10/03/news/economy/shutdown-debt-ceil
/index.html?iid=Lead
Forget the current government shutdown. Economists say it's the upcoming deb
t ceiling impasse that could plunge the nation into a recession.
About half of the 22 economists surveyed by CNNMoney say a recession will be
unavoidable if Congress fails to raise the nation's debt ceiling before the
Treasury runs out of cash later this month.
A couple more say a recession is possible depending on how far past the dead
line Congress goes before acting. And even those who aren't predicting reces
sion say not raising the debt ceiling would be a very bad idea.
"Financial markets are already being impacted in the short-run as a result o
f heightened uncertainty," said Sean Snaith, director of the Institute for E
conomic Competitiveness at the University of Central Florida. But he said th
ere would be greater long-term damage due to the spending cuts that would oc
cur.
Related: Investors bet on a U.S. default
"The fiscal shock treatment of having to eliminate the deficit in one fell s
woop would reduce GDP by more than 5% and cause a severe recession," he said
.
The economists agree the threat posed by not raising the debt ceiling is sig
nificantly greater than that posed by the federal government shutdown that s
tarted Tuesday. None predicted a recession being caused by the shutdown alon
e.
Related: Debt ceiling - countdown to default
"A short to medium duration partial shutdown is not enough to cause recessio
n," said Sam Bullard, economist with Wells Fargo Securities.
But if the debt ceiling isn't raised, the economists have many different wor
ries, including disruptions in financial markets, followed closely by a loss
of confidence in the dollar and Treasuries and very deep cuts in government
spending.
"No one can know for sure exactly what would happen in the event of a defaul
t, but we can all be sure that it would be bad," said Russell Price of Ameri
prise Financial.
Related: Buffett - Congress won't cross point of "extreme idiocy"
Even those economists who aren't predicting a recession are worried about th
e risks posed by the debt ceiling.
"Merely missing the debt ceiling deadline will not trigger a recession, but
the risks will rise rapidly with each week after the deadline passes," said
Patrick O'Keefe, director of economic research at accounting firm Cohn Rezni
ck.
Bank CEOs warn about the debt ceiling
Bank CEOs warn about the debt ceiling
Some of the economists believe if Congress doesn't raise the debt ceiling th
en the administration will act unilaterally. That might cause a constitution
al crisis but they believe it would avoid a financial crisis.
"My expectation in this scenario is that the President finds a sufficiently
plausible constitutional rationale to ignore the debt ceiling and keep on me
eting all US Federal obligations on time with no exceptions," said Bill Chen
ey, chief economist with Manulife Asset Management.
/index.html?iid=Lead
Forget the current government shutdown. Economists say it's the upcoming deb
t ceiling impasse that could plunge the nation into a recession.
About half of the 22 economists surveyed by CNNMoney say a recession will be
unavoidable if Congress fails to raise the nation's debt ceiling before the
Treasury runs out of cash later this month.
A couple more say a recession is possible depending on how far past the dead
line Congress goes before acting. And even those who aren't predicting reces
sion say not raising the debt ceiling would be a very bad idea.
"Financial markets are already being impacted in the short-run as a result o
f heightened uncertainty," said Sean Snaith, director of the Institute for E
conomic Competitiveness at the University of Central Florida. But he said th
ere would be greater long-term damage due to the spending cuts that would oc
cur.
Related: Investors bet on a U.S. default
"The fiscal shock treatment of having to eliminate the deficit in one fell s
woop would reduce GDP by more than 5% and cause a severe recession," he said
.
The economists agree the threat posed by not raising the debt ceiling is sig
nificantly greater than that posed by the federal government shutdown that s
tarted Tuesday. None predicted a recession being caused by the shutdown alon
e.
Related: Debt ceiling - countdown to default
"A short to medium duration partial shutdown is not enough to cause recessio
n," said Sam Bullard, economist with Wells Fargo Securities.
But if the debt ceiling isn't raised, the economists have many different wor
ries, including disruptions in financial markets, followed closely by a loss
of confidence in the dollar and Treasuries and very deep cuts in government
spending.
"No one can know for sure exactly what would happen in the event of a defaul
t, but we can all be sure that it would be bad," said Russell Price of Ameri
prise Financial.
Related: Buffett - Congress won't cross point of "extreme idiocy"
Even those economists who aren't predicting a recession are worried about th
e risks posed by the debt ceiling.
"Merely missing the debt ceiling deadline will not trigger a recession, but
the risks will rise rapidly with each week after the deadline passes," said
Patrick O'Keefe, director of economic research at accounting firm Cohn Rezni
ck.
Bank CEOs warn about the debt ceiling
Bank CEOs warn about the debt ceiling
Some of the economists believe if Congress doesn't raise the debt ceiling th
en the administration will act unilaterally. That might cause a constitution
al crisis but they believe it would avoid a financial crisis.
"My expectation in this scenario is that the President finds a sufficiently
plausible constitutional rationale to ignore the debt ceiling and keep on me
eting all US Federal obligations on time with no exceptions," said Bill Chen
ey, chief economist with Manulife Asset Management.
