Your Voice Your Vote 2024

Live results
Updated: Nov. 10, 11:03 AM ET

National Election Results: presidential

republicans icon Projection: Trump is President-elect
226
312
226
312
Harris
70,858,691
270 to win
Trump
74,535,467
Expected vote reporting: 94%

US debt default could cause 'longstanding harm,' Fed Chair Jerome Powell says

Powell called on Congress to raise the debt ceiling in Senate testimony.

March 8, 2023, 10:56 AM

Federal Reserve Chair Jerome Powell on Tuesday warned of potentially devastating consequences of a U.S. debt default and called on Congress to raise the debt ceiling.

Speaking to the Senate banking committee, Powell said a potential U.S. debt default could be "extraordinarily adverse and do longstanding harm."

"At the end of the day, there is only one solution to this problem and that is Congress," he added. "Congress really needs to raise the debt ceiling. That's the only way out."

In testimony before a House committee on Wednesday, Powell reiterated his concern about a potential debt default.

"Congress raising the debt ceiling is really the only alternative," he said. "There are no rabbits in hats to be pulled out on this."

"No one should assume that the Fed can protect the economy from the nonpayment of the government’s bills, let alone a debt default," he added.

The U.S. risks defaulting on its debts as early as July unless the borrowing limit is raised, the nonpartisan Congressional Budget Office said in a report last month.

The federal government on Jan. 19 reached its approximately $31.4 trillion debt ceiling -- which legally caps how much the U.S. can borrow to pay for what tax and other revenue doesn't cover -- and the Treasury Department has since been using "extraordinary measures" along with its current cash flow to keep the government's obligations paid.

Failure to raise the debt limit and the ensuing default on U.S. debt -- which have never happened before -- would all but ensure a U.S. recession that could put millions out of work, economists and budget analysts previously told ABC News.

The remarks from Powell add urgency to an ongoing political dispute in Congress over the debt ceiling.

Some Republicans in the House have resisted an increase of the debt limit unless Democrats agree to spending cuts. The Biden administration, however, has repeatedly said that it will not negotiate over the debt ceiling and that a discussion over spending should occur separately.

When asked whether the current uncertainty about a debt ceiling increase has damaged the economy, Powell said, "In principle, it could."

"I think markets tend and observers tend to watch this and tend to think that it will work out and it has in the past worked out," he added. "And it needs to work out this time, too."

Mark Zandi, chief economist at Moody's Analytics, testified to a separate Senate committee on Tuesday on the risk posed by a debt default.

"The Treasury debt limit is an immediate threat to any optimism the economy can skirt recession in the coming year and poses a long-term threat to the nation's finances and economic growth," Zandi said. "Financial markets and the economy would be hit hard."

In addition to comments about the debt ceiling, Powell spoke at length about inflation, which has fallen significantly from a summer peak but is more than triple the Fed's target of 2%.

The inflation fight "has a long way to go and is likely to be bumpy," Powell said.

Senate Banking, Housing, and Urban Affairs Committee chairman Sherrod Brown speaks with Sen. Tim Scott before a hearing on "The Semiannual Monetary Policy Report to the Congress" on Capitol Hill in Washington, March 7, 2023.
Kevin Lamarque/Reuters

The Fed last month imposed the latest in an aggressive string of borrowing cost increases as it tries to slash price hikes by slowing the economy and choking off demand. The approach, however, risks tipping the U.S. economy into a recession.

In all, the Federal Reserve has raised interest rates 4.5% over the past year.

Citing elevated inflation and a tight jobs market, Powell said the central bank expects "ongoing increases" to its benchmark interest rate and a sustained period of elevated rates before a change in policy.

Powell has repeatedly said that the Fed will keep its benchmark interest rate elevated until inflation reaches the central bank's 2% target. That means borrowers face higher costs for everything from car loans to credit card debt to mortgages.

"We will stay the course until the job is done," Powell said on Tuesday.

The major stock indexes fell on Tuesday after Powell's remarks. The Dow Jones Industrial Average dipped more than 500 points. The S&P 500 and Nasdaq each dropped more than 1%.

Despite heightened borrowing costs, the economy has largely defied an anticipated slowdown.

The economy added a staggering 517,000 jobs in January, well above the breakneck pace of some 400,000 monthly jobs added on average last year, according to government data released last month.

Fresh retail sales data last month blew past economist expectations, suggesting resilient consumer spending, the lifeblood of the U.S. economy.

The combination of easing inflation and sustained economic growth have raised hope among some of a "soft landing," in which the Fed slows the economy and brings down inflation while preventing the U.S. from entering a recession.

The hot economy could cause inflation to rise, however, prompting the Fed to raise rates further and risk a deeper and more prolonged economic slowdown.

A survey conducted last month by the National Association for Business Economics found that 58% of economists expect a recession in 2023.

Some Democratic senators have raised fears that continued rate hikes could cause an economic downturn that hurts low- and middle-income Americans.

"Raising interest rates can't rebuild our supply chains and fix demand imbalances from the pandemic," Sen. Sherrod Brown said. "Raising interest rates won't end Russia's brutal invasion of Ukraine."

"Not only will higher interest rates not solve it," the Ohio Democrat added. "If they're overdone, they'll make it worse."

In response, Powell acknowledged the complex reasons for heightened inflation but reaffirmed the role of the Fed in addressing price increases.

"We're well aware that this particular situation involves a mix of forces, not all of which our tools can affect," Powell said. "But there is a job here for us to do."

Related Topics

Popular Reads

ABC News Live

ABC News Live

24/7 coverage of breaking news and live events

seductrice.net
universo-virtual.com
buytrendz.net
thisforall.net
benchpressgains.com
qthzb.com
mindhunter9.com
dwjqp1.com
secure-signup.net
ahaayy.com
tressesindia.com
puresybian.com
krpano-chs.com
cre8workshop.com
hdkino.org
peixun021.com
qz786.com
utahperformingartscenter.org
worldqrmconference.com
shangyuwh.com
eejssdfsdfdfjsd.com
playminecraftfreeonline.com
trekvietnamtour.com
your-business-articles.com
essaywritingservice10.com
hindusamaaj.com
joggingvideo.com
wandercoups.com
wormblaster.net
tongchengchuyange0004.com
internetknowing.com
breachurch.com
peachesnginburlesque.com
dataarchitectoo.com
clientfunnelformula.com
30pps.com
cherylroll.com
ks2252.com
prowp.net
webmanicura.com
sofietsshotel.com
facetorch.com
nylawyerreview.com
apapromotions.com
shareparelli.com
goeaglepointe.com
thegreenmanpubphuket.com
karotorossian.com
publicsensor.com
taiwandefence.com
epcsur.com
mfhoudan.com
southstills.com
tvtv98.com
thewellington-hotel.com
bccaipiao.com
colectoresindustrialesgs.com
shenanddcg.com
capriartfilmfestival.com
replicabreitlingsale.com
thaiamarinnewtoncorner.com
gkmcww.com
mbnkbj.com
andrewbrennandesign.com
cod54.com
luobinzhang.com
faithfirst.net
zjyc28.com
tongchengjinyeyouyue0004.com
nhuan6.com
kftz5k.com
oldgardensflowers.com
lightupthefloor.com
bahamamamas-stjohns.com
ly2818.com
905onthebay.com
fonemenu.com
notanothermovie.com
ukrainehighclassescort.com
meincmagazine.com
av-5858.com
yallerdawg.com
donkeythemovie.com
corporatehospitalitygroup.com
boboyy88.com
miteinander-lernen.com
dannayconsulting.com
officialtomsshoesoutletstore.com
forsale-amoxil-amoxicillin.net
generictadalafil-canada.net
guitarlessonseastlondon.com
lesliesrestaurants.com
mattyno9.com
nri-homeloans.com
rtgvisas-qatar.com
salbutamolventolinonline.net
sportsinjuries.info
wedsna.com
rgkntk.com
bkkmarketplace.com
zxqcwx.com
breakupprogram.com
boxcardc.com
unblockyoutubeindonesia.com
fabulousbookmark.com
beat-the.com
guatemala-sailfishing-vacations-charters.com
magie-marketing.com
kingstonliteracy.com
guitaraffinity.com
eurelookinggoodapparel.com
howtolosecheekfat.net
marioncma.org
oliviadavismusic.com
shantelcampbellrealestate.com
shopleborn13.com
topindiafree.com
v-visitors.net
djjky.com
053hh.com
originbluei.com
baucishotel.com
33kkn.com
intrinsiqresearch.com
mariaescort-kiev.com
mymaguk.com
sponsored4u.com
crimsonclass.com
bataillenavale.com
searchtile.com
ze-stribrnych-struh.com
zenithalhype.com
modalpkv.com
bouisset-lafforgue.com
useupload.com
37r.net
autoankauf-muenster.com
bantinbongda.net
bilgius.com
brabustermagazine.com
indigrow.org
miicrosofts.net
mysmiletravel.com
selinasims.com
spellcubesapp.com
usa-faction.com
hypoallergenicdogsnames.com
dailyupdatez.com
foodphotographyreviews.com
cricutcom-setup.com
chprowebdesign.com
katyrealty-kanepa.com
tasramar.com
bilgipinari.org
four-am.com
indiarepublicday.com
inquick-enbooks.com
iracmpi.com
kakaschoenen.com
lsm99flash.com
nana1255.com
ngen-niagara.com
technwzs.com
virtualonlinecasino1345.com
wallpapertop.net
casino-natali.com
iprofit-internet.com
denochemexicana.com
eventhalfkg.com
medcon-taiwan.com
life-himawari.com
myriamshomes.com
nightmarevue.com
healthandfitnesslives.com
androidnews-jp.com
allstarsru.com
bestofthebuckeyestate.com
bestofthefirststate.com
bestwireless7.com
britsmile.com
declarationintermittent.com
findhereall.com
jingyou888.com
lsm99deal.com
lsm99galaxy.com
moozatech.com
nuagh.com
patliyo.com
philomenamagikz.net
rckouba.net
saturnunipessoallda.com
tallahasseefrolics.com
thematurehardcore.net
totalenvironment-inthatquietearth.com
velislavakaymakanova.com
vermontenergetic.com
kakakpintar.com
jerusalemdispatch.com
begorgeouslady.com
1800birks4u.com
2wheelstogo.com
6strip4you.com
bigdata-world.net
emailandco.net
gacapal.com
jharpost.com
krishnaastro.com
lsm99credit.com
mascalzonicampani.com
sitemapxml.org
thecityslums.net
topagh.com
flairnetwebdesign.com
rajasthancarservices.com
bangkaeair.com
beneventocoupon.com
noternet.org
oqtive.com
smilebrightrx.com
decollage-etiquette.com
1millionbestdownloads.com
7658.info
bidbass.com
devlopworldtech.com
digitalmarketingrajkot.com
fluginfo.net
naqlafshk.com
passion-decouverte.com
playsirius.com
spacceleratorintl.com
stikyballs.com
top10way.com
yokidsyogurt.com
zszyhl.com
16firthcrescent.com
abogadolaboralistamd.com
apk2wap.com
aromacremeria.com
banparacard.com
bosmanraws.com
businessproviderblog.com
caltonosa.com
calvaryrevivalchurch.org
chastenedsoulwithabrokenheart.com
cheminotsgardcevennes.com
cooksspot.com
cqxzpt.com
deesywig.com
deltacartoonmaps.com
despixelsetdeshommes.com
duocoracaobrasileiro.com
fareshopbd.com
goodpainspills.com
hemendekor.com
kobisitecdn.com
makaigoods.com
mgs1454.com
piccadillyresidences.com
radiolaondafresca.com
rubendorf.com
searchengineimprov.com
sellmyhrvahome.com
shugahouseessentials.com
sonihullquad.com
subtractkilos.com
valeriekelmansky.com
vipasdigitalmarketing.com
voolivrerj.com
worldhealthstory.com
zeelonggroup.com
1015southrockhill.com
10x10b.com
111-online-casinos.com
191cb.com
3665arpentunitd.com
aitesonics.com
bag-shokunin.com
brightotech.com
communication-digitale-services.com
covoakland.org
dariaprimapack.com
freefortniteaccountss.com
gatebizglobal.com
global1entertainmentnews.com
greatytene.com
hiroshiwakita.com
iktodaypk.com
jahatsakong.com
meadowbrookgolfgroup.com
newsbharati.net
platinumstudiosdesign.com
slotxogamesplay.com
strikestaruk.com
techguroh.com
trucosdefortnite.com
ufabetrune.com
weddedtowhitmore.com
12940brycecanyonunitb.com
1311dietrichoaks.com
2monarchtraceunit303.com
601legendhill.com
850elaine.com
adieusolasomade.com
andora-ke.com
bestslotxogames.com
cannagomcallen.com
endlesslyhot.com
iestpjva.com
ouqprint.com
pwmaplefest.com
qtylmr.com
rb88betting.com
buscadogues.com
1007macfm.com
born-wild.com
growthinvests.com
promocode-casino.com
proyectogalgoargentina.com
wbthompson-art.com
whitemountainwheels.com
7thavehvl.com
developmethis.com
funkydogbowties.com
travelodgegrandjunction.com
gao-town.com
globalmarketsuite.com
blogshippo.com
hdbka.com
proboards67.com
outletonline-michaelkors.com
kalkis-research.com
thuthuatit.net
buckcash.com
hollistercanada.com
docterror.com
asadart.com
vmayke.org
erwincomputers.com
dirimart.org
okkii.com
loteriasdecehegin.com
mountanalog.com
healingtaobritain.com
ttxmonitor.com
nwordpress.com
11bolabonanza.com