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'Irreparable damage,' 'financial Armageddon': Biden admin, Democratic economists sound alarm in bid to raise debt limit, warn US will run out of cash in October

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Biden administration officials and Democratic economists are warning congressional leaders that if action is not taken soon to raise the country's $28.4 trillion debt limit, ruinous injury could be incurred by the American economy.

What are the details?

In a letter to top lawmakers Wednesday, Treasury Secretary Janet Yellen characterized America's financial situation as teetering on the edge of catastrophe, noting that without intervention the U.S. government would run out of cash by next month.

"Based on our best and most recent information, the most likely outcome is that cash and extraordinary measures will be exhausted during the month of October," the secretary said.

As Congress deliberates raising the debt limit, Yellen warned that the uncertainty alone may inflict harm on the financial markets. She recalled the last debt limit standoff in 2011 that resulted in the United States' credit rating being downgraded for the first time ever.

"A delay that calls into question the federal government's ability to meet all its obligations would likely cause irreparable damage to the U.S. economy and global financial markets," she wrote.

What else?

Others, too, have sounded the alarm, forewarning that the effects of a debt default or government shutdown could be irreversible.

"In short, a default would be an economic cataclysm," CNN reported. "Interest rates would spike, the stock market would crater, retirement accounts would take a beating, the value of the US dollar would erode and the financial reputation of the world's only superpower would be tarnished."

"It would be financial Armageddon," Mark Zandi, a Democratic economist who leads Moody's Analytics, told the network. "It's complete craziness to even contemplate the idea of not paying our debt on time."

JPMorgan Chase CEO Jamie Dimon also urged lawmakers to action in May, according to CNN. At that time, he said a default "could cause an immediate, literally cascading catastrophe of unbelievable proportions and damage America for 100 years."

Anything else?

The comments come as congressional lawmakers approach a decision point this month on the debt limit. Reuters reported Tuesday that with both sides entrenched, the debate is set to "become a monumental game of chicken."

Republicans have cast Democratic arguments for raising the debt limit as rich considering the party's keenness for exorbitant government spending.

In May, Republican Sen. Mitch McConnell slammed Democrats' multitrillion-dollar plan to expand social services, saying, "If they want all this spending and debt to be their signature legacy, they should leap at the chance to own every bit of it" by passing a debt limit without Republican votes.

In order to do that, Democrats would reportedly need to shove the debt limit increase into a reconciliation bill that they could advance in the Senate without Republican support.

But owning the issue does not appear to be something Democrats want to do. Democratic House Speaker Nancy Pelosi told reporters Wednesday, "We won't be putting it in reconciliation," while blaming the increased debt on former President Trump.

It should be noted that both parties do share some of the blame for a continually ballooning national debt.

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