In a significant move, White House economists on Wednesday warned of a potential global financial crisis if US  Congress fails to raise the federal government's debt limit before the country is expected to default on the national debt.

"Financial markets would lose faith in the United States, the dollar would weaken, and stocks would fall," economists at the White House Council of Economic Advisers led by Cecilia Rouse said in a blog post. "The U.S. credit rating would almost certainly be downgraded, and interest rates would broadly rise for many consumer loans," the economists said, adding these and other consequences could trigger a U.S. economic recession.

Meanwhile, the global economy, which relies on a strong U.S. economy, could begin to slide into a financial crisis and a recession, as the consequences of a U.S. default could accelerate rapidly if not resolved, they noted.

Noting that the 2008 financial crisis had ripple effects all through the global economy that ricocheted back to U.S. shores, they believed that a global financial crisis driven by a U.S. default "has the potential to be even worse," as the global economy has not fully recovered from the COVID-19 pandemic. "The debt ceiling is not and should not be used as a political football. The consequences are too great," the economists concluded.

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