In CNN's town hall with Donald Trump on Wednesday, the former president said a US default on its debt may be "psychological" and that it "could be nothing" or perhaps just "a bad week or a bad day."
Economists disagree; many of them.
As the political impasse continues and the country inches closer to the day the government will no longer be able to meet all of its financial obligations, a slew of economists have released estimates on what the economic impact of a US debt default would look like. Those estimates have all been grim.
If the United States defaults on its debt, it would undermine faith in the federal government's ability to pay all its bills on time, affecting the government's credit rating and unleashing massive turbulence in financial markets.
The United States was in a similar situation in 2011 when it got close to defaulting. In that instance, S&P Global Ratings credit rating agency downgraded the government from AAA to AA+ credit rating. The federal government maintains a perfect credit rating from Fitch and Moody's, but that could change as the stalemate drags on.
Investors care about stability and predictability, so a credit rating downgrade would send a chill down Wall Street's spine. Except, some market tensions have already manifested. Yields on Treasury bills for early June, when the Treasury Department could exhaust its cash and extraordinary measures, have soared this month. Borrowing costs for credit card rates and mortgage rates would spike, since US debt serves as a critical benchmark for various forms of debt. That leaves Americans having to pay more to borrow — on top of the Federal Reserve's own rate hikes.
"Worsening expectations regarding a possible default would make significant disruptions in financial markets increasingly probable," Wendy Edelberg and Louise Sheiner of the Brookings Institution wrote in an analysis. "Such financial market disruptions would very likely be coupled with declines in the price of equities, a loss of consumer and business confidence, and a contraction in access to private credit markets."
A direct hit for American households
Americans' investments would take a major hit as stocks lose as much as a third of their value, wiping out around $12 trillion in household wealth, according to Moody's Analytics.
The broadest economic impact of a US debt default would be a recession that would encompass the global economy, including sharp job losses.
"A default would threaten the gains that we've worked so hard to make over the past few years in our pandemic recovery. And it would spark a global downturn that would set us back much further," Treasury Secretary Janet Yellen said Thursday in Japan, where she is attending a meeting of G7 finance ministers and central bankers.
In a scenario in which the government's default persists for months, that could mean 7.4 million job losses in the United States, according to Moody's Analytics. California would lose 841,600 jobs, Texas would shed 561,700 jobs and there would be 474,700 jobs lost in Florida.
And the housing market would not be spared by the "economic calamity" of a US government default, as Yellen once described it.
A new analysis from Zillow estimated that housing costs would soar by 22%, with the rate for 30-year, fixed rate mortgages rising above 8%, and existing home sales would fall by 23% at their lowest point if there is debt default.
"A lot of things we assume are part of our financial fabric would get ripped away," Rohit Chopra, director of the Consumer Financial Protection Bureau, told CNN in an interview on Thursday.
"It's a big worry. Every family should be concerned," he said. "From our own knowledge and oversight of the banking system, we know that everyone is extremely concerned. Corporate America, Main Street, all of it could be affected."
Tens of millions impacted
If the US government were to default on its obligations, it would quickly have a major financial impact on tens of millions of Americans.
About 66 million retirees, disabled workers and others receive monthly Social Security benefits. These payments could be delayed if Treasury doesn't have enough funds — about $25 billion a week — on hand.
Almost two-thirds of beneficiaries rely on Social Security for half their income, and for 40% of recipients, the payments constitute at least 90% of their income, according to the National Committee to Preserve Social Security and Medicare.
More than 2 million federal civilian workers and around 1.4 million active-duty military members could see their paychecks delayed. Federal government contractors could also see a lag in payments, which could impact their ability to compensate their workers. Certain veterans' benefits, including disability payments and pensions for some low-income veterans and their surviving families, could be affected.
About $25 billion in pay or benefits for active-duty members of the military, civil service and military retirees, veterans and recipients of Supplemental Security Income is sent out on the first day of the month, according to the Congressional Budget Office.
Delays in these payments would ripple through the economy since consumers would have less money to spend and their confidence would be shaken. This would be especially true in areas with many senior citizens and lower-income residents.
What's more, many federal government payments that flow to states, municipalities, people and others could be affected, which would have economic consequences. Food stamps and unemployment benefits could be interrupted.
Disruptions to Medicare and Medicaid payments would hurt health care providers, particularly smaller hospitals and doctors' offices that operate on slim profit margins, a recent Moody's Analytics report said. If the impasse dragged on, these providers may become less willing to treat patients covered by the government programs.
— CNN's Matt Egan contributed to this report.