US Treasury report warns of potentially catastrophic effects on economy from US debt default

WASHINGTON – The U.S. Treasury Department is warning that the economy could plunge into a downturn worse than the Great Recession if Congress fails to raise the federal borrowing limit and the country defaults on its debt obligations.

Treasury’s report says a default could cause the nation’s credit markets to freeze, the value of the dollar to plummet and U.S. interest rates to skyrocket.

Treasury officials hope by laying potential consequences they will be able to bring pressure on Congress to act. Treasury Secretary Jacob Lew has said he will have used up the extraordinary measures to avoid breaching the debt ceiling by Oct. 17. After that, the government will have around $30 billion of cash on hand.