Economists: Failure to raise debt limit could cause recession

Zachary Roth

The pressure on Congress to get serious about a deal on the debt ceiling is mounting by the day.

A group of 235 prominent economists, including six Nobel Prize winners and a former top White House economics adviser, today called on congressional leaders to raise the ceiling, and to do so "without attaching drastic and potentially dangerous reductions in federal spending."

In a letter coordinated by the Economic Policy Institute and the Center for American Progress, two liberal Washington think tanks, the economists warned that failure to raise the spending limit would badly hurt economic growth. "In a worst case," they wrote, "it could push the United States back into recession.

The letter's signers include Laura Tyson, who served as chair of the White House Council of Economic Advisers during the Clinton administration, as well as George Akerlof, Kenneth Arrow, Robert Engle, Eric Maskin, William Sharpe, and Robert Solow--all former winners of the Nobel Prize for Economics.

Congressional Republicans have lately been insisting on massive spending cuts, and no tax hikes, in exchange for supporting a debt ceiling rise--something Democrats have rejected as damaging to the economy. If there's no deal before August 2, the U.S. would likely default on its debt, with potentially catastrophic consequences for the economy.

The economists' letter jibes with a warning issued earlier this week by Mark Zandi, the respected head of Moody's Economics, who warned that a default would likely trigger a recession.

(Photo: Charles Dharapak, File/AP)