Washingtoin: Experts predict that a US debt default, which looms over the nation given current congressional disagreements, could cause enormous economic damage.
According to Moody's Analytics Company, "the economic recession would be comparable to the global financial crisis" that occurred in 2008, where nearly eight million people lost their jobs and the unemployment rate increased to 8%.
Several U.S. states would be disproportionately affected by this scenario, with unemployment predicted to be higher than 9% in Alabama, Illinois, Ohio, and Mississippi and to rise to almost 11% in Michigan.
Also Read: PM Modi meets key Australian figures, Indian Diasporas
The turmoil is anticipated to cause a nearly 20% decline in stock prices, wipe out $10 trillion in household assets held in various plans, and increase borrowing costs for both individuals and businesses.
Moody's Analytics economists stated that "most state economies will be hit hard whether the debt limit is breached, although the pain would vary." The hardest hit area would be Washington, D.C., where one in four jobs are related to the federal government.
Also Read: The opposition party in East Timor wins the majority of seats in the parliamentary vote
According to Moody's, even a brief breach of the debt ceiling, in which the government defaults less than a week before lawmakers raise the borrowing cap, would probably cause the domestic economy to enter a recession.
According to this scenario, 1.5 million Americans would lose their jobs, raising the unemployment rate from 3.4% to 5% while the GDP of the country shrank by 0.7%.
The federal government would be forced to reduce spending by about $150 billion, and "as these cuts damage the economy, the impact on growth would be overwhelming"
