After hitting the $31.4 trillion national debt limit back in January, Treasury Secretary Janet Yellen began using “extraordinary measures” to keep the government running. But in a string of recent interviews, Yellen has repeatedly warned that she can’t keep the game up forever. She says the X-date, the day the government will no longer have the funds to operate, could come as soon as June 1 and bring with it economic catastrophe.
In the face of this nightmare scenario, the pressure on politicians to get a debt deal done has been intense. Famed economists, including Harvard professor Jason Furman, have lamented the unnecessary economic drag caused by the debt ceiling “brinkmanship” in Washington. And respected Wall Streeters have also been sounding the alarm, including Morgan Stanley’s chief investment officer Mike Wilson, who warned this week that the debt ceiling drama is a “lose-lose for markets.” CFOs nationwide are even preparing for a world where the U.S. defaults on its debts, with JPMorgan Chase CEO Jamie Dimon describing a “war room” he’s created to plan for the worst.
And now, a group of more than 140 CEOs and Wall Street titans—including Pfizer CEO Albert Bourla, Macy’s CEO Jeff Gennette, Morgan Stanley’s CEO James Gorman, Goldman Sachs’ CEO David Solomon, and Henry R. Kravis, co-founder of the investment firm KKR— have come together to rebuke politicians for their inability to come to a debt ceiling agreement.
“We write to emphasize the potentially disastrous consequences of a failure by the federal government to meet its obligations,” the group wrote in an open letter to President Biden and Congress Tuesday.
The CEOs and Wall Street leaders noted that in 2011, when it took until two days before the government’ X-date to raise the debt ceiling, the stock market sank 17%. And according to Moody’s data presented in the letter, the crisis caused a 0.7 percentage point increase in unemployment and $180 billion economic contraction.
They explained that these dire impacts “occurred without an actual default,” and that if the U.S. truly were to hit the X-date, it could lead to further bank failures after the industry’s recent instability, and “threaten the government’s ability to pay its other bills, potentially including some payments to Social Security or Medicare recipients.”
“This cannot be allowed to happen,” they added. “We strongly urge that an accord be reached quickly so that the country can avert this potentially devastating scenario.”
On Wednesday, the day after receiving the letter, House Speaker Kevin McCarthy said that he was making slow progress towards a resolution to the debt ceiling issue with the Biden administration.
“I think at the end of the day we do not have a debt default,” he told CNBC. “The timeline is very tight. But we’re going to make sure we’re in the room and get this done.”
And Biden also gave a hopeful speech on Wednesday, saying that he was hopeful the US could avoid a default.
“I’m confident that we’ll get the agreement on the budget and America will not default,” Biden said adding that there was “no alternative.”
