Congressional Budget Office (CBO) Director Douglas Elmendorf said he could not predict with precision what would happen if Congress can't come to a compromise over increasing the US debt limit and a default takes place.
Michael Bonfigli/The Christian Science Monitor
If a stalemate over increasing the US debt limit persists, the potential decision to let the US government default on its debt "would be a dangerous gamble," says Congressional Budget Office Director Douglas Elmendorf.
Speaking Tuesday at a Monitor-hosted breakfast for reporters, Mr. Elmendorf admitted his staff economists could not predict with precision what would happen if a default takes place. "It is difficult to know for sure what would happen because we have no recent experience with our federal government defaulting on its obligations. That’s what makes it a gamble," he said.
On Tuesday, Vice President Joe Biden will moderate talks with a bipartisan congressional panel, seeking a deal that would allow for the passage of an increase in the US government's $14.29 trillion debt ceiling. The Treasury Department has said the government could start defaulting on its obligations by Aug. 2 if the ceiling is not raised.
Elmendorf, who has led Congress's forecasting and analysis arm since 2009, noted that the nation's financial position increases the risk of default. "Any government that has borrowed as much as ours has borrowed and will need to borrow as much as ours will need to borrow cannot take the views of its creditors lightly," he said.
Even a small rise in the perceived risk of Treasury securities "would be very expensive for the country," Elmendorf said. If the interest rates on Treasury securities moved up by 10 basis points or 0.1 percentage points, it would add $130 billion to interest payments over the coming decade.