The US Treasury Department has outlined key risks to the American economy that need to be addressed to maintain resilience. Among these, the most urgent concern is the failure to act on the debt limit, which could cause catastrophic consequences. On January 19, 2023, the US public debt reached the statutory limit, and the Treasury Department has taken extraordinary measures to prevent default.
A US government default would lead to an economic crisis affecting millions of jobs, household incomes, and real GDP. Credit agencies could downgrade US securities, raising borrowing costs for businesses and consumers. The consequences would extend to those reliant on government assistance, such as Social Security, Medicare, and veterans' benefits.
The Treasury Department also highlighted other risks, including potential financial instability in the banking system, inflation remaining above the Federal Reserve's 2% target, higher interest rates impacting the housing market, and geopolitical factors. The ongoing war in Ukraine, China's uncertain economic prospects, and OPEC+ oil production cuts create additional uncertainty.
To prevent negative consequences, the Biden Administration urges Congress to pass a clean debt ceiling increase, thereby safeguarding the US economy and its reputation. The US economy, although resilient, faces challenges that require prompt action to ensure continued growth and stability.