Third Way: Default would harm 'tens of millions of Americans'

The U.S. government has never defaulted on its obligations, but is projected to hit its $14.3 trillion debt ceiling next week. As it stands, the Treasury Department says it can use measures at the government’s disposal to meet those current obligations until Aug. 2.

Officials from both sides of the aisle are currently trying to find a compromise that would raise the debt ceiling while also reducing deficits. Some top Republicans have said any deal could not include taxes and should have cuts in entitlement spending, while Democrats have moved to remove Social Security from the discussion.

The Wall Street Journal also reported recently that more and more House Republicans do not see early August as a firm deadline for raising the debt ceiling. Conservative Republicans have said that Treasury might have even further methods to delay default as well, though the administration has largely dismissed those assertions.

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Third Way expects to distribute its report, which was co-authored by the think tank’s Lauren Oppenheimer, all around Capitol Hill on Monday. Kessler also said it would be sent to around 500 to 1,000 academics and economists. 

He added that the think tank decided to look into the matter after the office found little in the way of readily accessible concrete details about the aftermath of default.

“We’re not dumb, but it all seemed so abstract,” Kessler said. 

The group’s report — which calls default a never-before-seen “black swan” event — says default would cause Treasury bonds, now seen as one of the safest investments going, to see their rates rise and would likely sharply reduce investor confidence in the dollar. Default would also tighten up the lending market, the study says.