Summers on U.S. Debt Default Ramifications

Former White House economic director Larry Summers says that a U.S. default on its debt would be “financial Armageddon.”

Summers says that he believes default will not happen because he is hopeful that legislators and the president can reach an amenable agreement, but he believes the consequences would be dire if default were to occur. Defaulting on the nation’s debt obligations is “not something any rational individual would contemplate permitting.”

Legislators are trying to work out a deal to keep that from happening with Democrats calling for a combination of tax increases and spending cuts, while Republicans say tax increases are off the table. The deadline to raise the nation’s debt limit is August 2, although it takes time to pass and enact legislation so the effective date is actually sooner.

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