The U.S. economy could plummet into the worst recession since the Great Depression if Congress fails to raise the $16.7 trillion debt ceiling before October 17, according to a U.S. Treasury Department report [PDF] released Thursday.
With two weeks to go before the debt ceiling deadline and the ongoing government-funding standoff over the Affordable Care Act unresolved, Treasury warned that political brinkmanship engendering "even the prospect of a default" could hurt financial markets and U.S. businesses.
Frozen credit markets, skyrocketing U.S. interest rates, and a substantially weakened U.S. dollar could result if the U.S. government exhausts its borrowing capacity, according to the Treasury report. During the debt ceiling impasse in 2011, consumer and business confidence dropped, job growth slowed, and financial markets experienced stress, the department notes. Additionally, that year the U.S. government's debt was downgraded by credit-rating agency Standard & Poor's, which led to similar moves by Moody's and Fitch.