Recession a threat even if Treasury avoids default

Last edited 8:31 a.m., Oct. 10, 2013

Should Congress fail to raise the debt ceiling by the Oct. 17 deadline, the U.S. Treasury could still make most of the nation’s payments on time and avoid defaulting on its debt, according to a Bloomberg report.

Without an agreement on the debt ceiling limit, paying principal and interest on the country’s bills might avoid a debt default, but leading economists predict the Treasury would still miss other obligations, mostly in the form of salaries to government workers and contractors.

The drop in government spending would cost the economy $175 billion just in November, a cut “so huge it would put the U.S. back into recession,” according to a former chairman at Goldman Sachs.

Read more at Bloomberg.