The U.S. Treasury released a report on Thursday outlining the potential consequences of not raising the debt ceiling.
In the report, the Treasury touched on the impact of the 2011 debt ceiling crisis, which put investors on edge and sent markets into a tailspin. Treasury Secretary Jack Lew said the $16.999 trillion debt limit reached in May will not sustain the country after Oct. 17, TIME reports.
The Treasury said the current government shutdown endangers the nation’s economic outlook, which could be harmed even further by another prolonged debate over raising the debt ceiling.
“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,” Lew said. “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.”
In its report, the Treasury said even the possibility of a default could lead to sharp decreases in household wealth, increases in borrowing and a decline in private-sector confidence. The department also said that, in the event of a default, the U.S. would fall into a recession worse than any seen since the Great Depression.
“If market participants were to lose confidence in the United States’ willingness to repay its debts, the adverse effects seen in 2011 could reappear, and even push up yields on Treasury securities,” the report said. “Such a rise in Treasury yields would also raise the cost of financing the government’s debt and worsen the fiscal position of the government.”