WASHINGTON — The Treasury Department warned Thursday that a failure by Congress to raise the country’s debt limit could have a “catastrophic impact” on the U.S. economy.
In a six-page report, Treasury said the economy could fall into a recession if Congress fails to reach an agreement on raising the nation’s $16.7 trillion borrowing limit by Oct. 17.
The federal government is entering its third day of a shutdown after Congress failed to reach a deal to fund the government, and experts are concerned the impasse on Capitol Hill will spill over into the debate on the debt ceiling, which, if breached, will force the country to default on its debt obligations. RELATED STORY: Industry Weighs Fallout From Government Shutdown >>
The Treasury report said a default could cause credit markets to freeze, force the value of the dollar to plummet and cause interest rates to skyrocket, which would “reverberate around the world.”
“Political brinkmanship that engenders even the prospect of a default can be disruptive to financial markets and American businesses and families,” the report said.
“As we saw two years ago, prolonged uncertainty over whether our nation will pay its bills in full and on time hurts our economy,” said Treasury Secretary Jacob J. Lew. “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. Our nation has worked hard to recover from the 2008 financial crisis, and Congress must act now to lift the debt ceiling before that recovery is put in jeopardy.”
The report cited the Congressional impasse over the debt limit in 2011, which led to the first-ever downgrade of the country’s credit rating and negative economic consequences.
Congress eventually raised the debt ceiling and did not default, but the impact was felt throughout the economy.
Consumer confidence fell 22 percent from June to August in 2011, while business confidence fell 3 percent, according to the report.
The S&P 500 index fell 17 percent during the debt-limit debate in 2011, and household wealth fell $2.4 trillion between the second and third quarters of that year. Household wealth is tied to consumer spending, which accounts for approximately 70 percent of gross domestic product.
In addition, stock prices, stock-price volatility, credit-risk spreads and mortgage spreads all “deteriorated” in August that year and took many months to recover.
As part of the domino effect, lower stock prices reduced retirement security during the same period in 2011, and retirement assets fell $800 billion, the report said.
The report also noted that economists’ forecast for real GDP to accelerate to a 2.4 percent annual rate in the second half this year and a 2.8 percent rate in 2014 has already been put “at risk” because of the government shutdown.
One key economic indicator — the jobs report — is being postponed due to the shutdown. The Labor Department said Thursday it is postponing the release on Friday of the September jobs report, which includes the unemployment rate and total number of jobs added to or subtracted from payrolls. The agency did not announce a new release date.
Taking the final spot on the mens’ portion of New York Fashion Week calendar next month will be none other than @tomford. Though he’s shown his men’s wear in New York in the past, this will mark the first time the designer has shown his men’s collection alone during New York Fashion Week: Men’s. His runway show will debut on February 6 at the Park Avenue Armory. #wwdfashion
London-based couture house @ralphandrusso has certainly been in the spotlight, having its dresses worn by @beyonce, Angelina Jolie, Meghan Markle in her engagement photos and more. For couture, Tamara Ralph focused on ornamentation — think: feathers with chain mail, jet embroidery and clusters of pearls and crystals. See the rest of the collection on WWD.com #wwdfashion #couture (📷: @giovanni_giannoni_photo)
Minnie Mouse celebrated her 90th birthday by getting her own star on the Hollywood Walk of Fame. For her celebratory luncheon, @coach’s creative director @stuartvevers dressed her in a custom made prairie dress, complete with Vever’s take on the polka dot – black sequined versions – under a cropped motorcycle jacket. The designer also put his own mark on Minnie’s classic red shoes, infusing the color with sparkles and adding some Coach crystals. “We chose colors that were very Minnie and also represented quintessential Coach elements,” said Vevers. #wwdfashion #nationalpolkadotday (📷: George Chinsee)
@nickjonas is unveiling his first-ever apparel collection through a partnership with John Varvatos. The limited-edition capsule, which makes its debut in spring, also marks the first time the designer has collaborated with anyone on a line. “The process in working with Nick is amazing. It’s inspiring to be around someone who is not only connected with the trade that they do, but also with what’s happening in the environment around him, and how that connects to what we do with style,” said Varvatos. (RG: @johnvarvatos) #wwdfashion
@margotrobbie steps out onto the red carpet wearing @miumiu. The actress is nominated for “Outstanding Performance by a Female Actor in a Leading Role” in “I, Tonya” at the #SagAwards. (📷: Stewart Cook) #wwdfashion
For @massimogiorgetti of @msgm, the Nineties are his favorite decade. “They had a huge impact on my personal growth. What I like of the Nineties is that they are not so precise in terms of style as other decades…there was actually a bit of everything,” he said. As seen on MSGM’s Spring 2018 show: tie-dye and a bit of grunge, two styles that are synonymous with the decade #wwdfashion #wwddecades (📷: @kukukuba)