We all know that a continued standoff on the debt ceiling would be bad for the U.S. economy and financial markets.
But even a deal along current lines is going to cost jobs–lots of jobs–and take a bite out of economic growth, according to Bloomberg Economics (Which is not, I’d note, known as a bastion of liberal opinion.)
Spending cuts expected in an eventual deal to raise the U.S. debt limit could cost the country as many as 570,000 jobs and make the recession projected by Bloomberg Economics even worse.
“Our baseline forecast is already for a recession” in the second half of 2023, and “spending cuts would make it worse, with further headwinds headed into the 2024 presidential election,” she wrote.
The Bloomberg Economics analysis, using the SHOK model at Bloomberg, found that the Republicans’ Limit, Save, Grow Act of 2023 proposal could reduce gross domestic product by 0.8 percentage points and boost the unemployment rate by 0.4 percentage points. That translates into 570,000 jobs lost through the end of next year.
Even a middle-of-the-road deal with fewer spending cuts, like that favored by Democrats, could reduce GDP by 0.5 percentage points and boost unemployment by 0.2% percentage points through the end of 2024, Wong said.