Janet Yellen, Treasury Secretary, called Thursday's debt ceiling "very destructive".
In a September 17 memo, the White House stated that hitting the debt ceiling could lead to a recession.
If the US defaults on its debt, services that aren't dependent on federal funds would continue to function.
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The Congress is divided along party lines about whether or not to raise the US Debt Ceiling, the legal limit to how much the federal government may owe its creditors.
If Congress fails to act by October 18, Treasury Secretary Janet Yellen wrote to Nancy Pelosi, warning that her department's ability is exhausted to finance government operations. This could threaten the country's credit rating as well as its ability to meet financial obligations.
On Thursday, she also stated to the House Financial Services Committee that she believes the debt ceiling is "very debilitating" and supports its removal. This was something previously Treasury secretaries also supported.
On Tuesday, Senate Minority Leader Mitch McConnell said that he doesn't believe the US will default on its debt. This despite leading a GOP effort Monday against a measure to stop the government default. The Democrats are looking for ways to bypass the opposition of the GOP and increase the debt ceiling as time is running out.
The effects of defaulting on government debt can have a devastating effect.
What federal services would be affected by this?
In an opinion piece published in The Wall Street Journal, Yellen stated that millions of Americans would be short on cash as crucial payments would be delayed indefinitely.
Nearly 50 million seniors can get Social Security checks.
Millions of families can get monthly child tax credits.
For troops, paychecks
In a September 17 memo the Biden administration echoed Yellen’s concerns, stating that major cuts in federal aid would impact school lunch programs, Medicaid and disaster relief for earthquakes, hurricanes, and wildfires.
"Hitting the debt limit could lead to a recession," the memo stated. The memo stated that economic growth would slow down, unemployment would rise and the labor market would lose millions of jobs.
The US Postal Service is one example of a service that doesn't depend on federal tax dollars for its operation.
How can a government default harm the economy?
Yellen stated that a default on debt could lead to spikes in interest rates and steep falls in stock prices. This could result in millions of job losses and downgraded credit ratings.
She wrote that "our current economic recovery would reverse into a recession with billions in dollars of growth, and millions of jobs lost."
America's credit rating was lowered as it neared its debt limit in 2011. This led to a prolonged stock market downturn. The next few weeks will see congressional officials make decisions that will impact whether or not the American economy is set up for similar economic consequences.
Yellen stated that Congress has raised or suspended the debt ceiling for the country three times under Trump's administration, and almost 80 times since 1960.
