US administration says default could be 'catastrophic'
WASHINGTON (REUTERS) - The Obama administration said the US economy could fall into its deepest crisis since the Great Depression if Congress does not raise a cap on government borrowing soon and warned it would be impossible to prioritise debt payments over other obligations.
In a report released on Thursday, the Treasury Department said a US debt default could force up borrowing costs, weaken investment and curb growth. This could inflict damage on the economy that could last for longer than a generation.
"A default would be unprecedented and has the potential to be catastrophic," Treasury said.
"The negative spillovers could reverberate around the world, and there might be a financial crisis and recession that could echo the events of 2008 or worse."