Failure to raise the government's debt ceiling will wipe out this year's economic growth in just 95 days, according to data compiled by The Wall Street Journal.
The U.S. officially hit the debt ceiling on May 16 at $14.3 trillion, although Treasury Secretary Timothy Geithner has said that if lawmakers don't raise that limit by Aug. 2, the government will no longer be able to spend more than it collects in revenue.
That means the government will cut spending by about 35 percent and likely slash payments to contractors, soldiers’ salaries, Social Security and Medicare.
|Treasury Secretary Timothy Geithner
(Getty Images photo)
"On average, the cuts would amount to about $3.8 billion a day, according to our own estimates based on projections from the Congressional Budget Office," the Journal reports.
"At that rate, over a period of only 95 days, the cuts would add up to 2.9 percent of gross domestic product, adjusted for inflation. That’s just enough to negate all the economic growth forecasters expect in 2011."
Some lawmakers oppose raising the debt ceiling without winning budget concessions in the form of spending cuts.
White House officials say tying reducing deficits to raising the federal debt ceiling is wrong.
"We must address our long-run fiscal challenges," says Austan Goolsbee, chairman of the White House Council of Economic Advisers, according to Reuters.
"But to tie this to the debt limit is in my view quite insane."
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