Moody’s Analytics chief economist Mark Zandi told CNN on Wednesday “everyone is going to get hurt” if the nation defaults, adding it’s “just a matter of degree.”
Zandi said 401(k) plans and other pension assets will decline in value, and borrowing money for mortgages or purchasing a car will be more difficult, especially as interest rates will rise. And people who rely on government checks, from Social Security support to military salaries, could receive money later than usual.
Zandi said the earliest the nation might run out of funds is June 1, but the most likely deadline is June 8, based on his calculations. Treasury Department Secretary Janet Yellen reiterated Wednesday that the U.S. government is “almost certain” to miss payments in early June, without a deal to raise the debt ceiling.
Zandi said that would sink the country into a recession, spurring unemployment and stifling raises.
He added that the debt ceiling is “counterproductive” to solving the country’s economic problems, saying instead that Congress needs to restrain government spending and increase tax revenue.
As Republicans have expressed skepticism about the June 1 deadline and insisted on spending cuts in exchange for raising the debt ceiling, some Democrats have urged Biden to invoke the 14th Amendment to act unilaterally. The constitutional amendment says U.S. debts “shall not be questioned,” though its applicability to the debt ceiling is untested.
Zandi said invoking the 14th Amendment to address the debt ceiling would “create a lot of chaos” because such a decision could face legal challenges and potentially be overturned by a Supreme Court controlled by conservatives.
However, Zandi said if the nation runs out of funds, it still might be the most desirable option to choose.
“Then it’s a Hobson’s choice. Which is the worst bad choice? And the 14th Amendment may be the best bad choice to take,” Zandi said.
Yellen has warned invoking the 14th Amendment could raise a “constitutional crisis.”