New York CNN
Moody's Analytics warns that a prolonged default on the debt of the United States could have disastrous consequences for American jobs.
Treasury Secretary Janet Yellen forecasts that the United States may run out of cash by early June and will need to take extraordinary measures to pay their bills if Congress doesn't act.
According to Moody's projections, while most states would be "hit hard" by a breach of the debt limit, economic pain will vary by state. This would be disproportionately harmful to states that have large concentrations or jobs that are funded by the government. Washington, DC and other states that are near federal institutions, such as military bases or national laboratories, or rely on them, such as Alaska and Hawaii, would be affected.
Moody's has found that Florida, Ohio, and Pennsylvania could also lose hundreds of thousands each if the debt ceiling is breached for several months.
Analysis shows that there would be other damage. The unemployment rate in California (8.7%), Ohio (9.5%) and the District of Columbia (8.9%) would reach double digits. Michigan's rate of unemployment would rise to 10.8% from its current 4.1%.
Virginia, Connecticut Kansas and Washington are other states that will feel the impact.
Moody's says that states reliant on tourism, such as Arizona, Florida, and Nevada, will experience'sharp' loss of jobs, just like those reliant on auto manufacturing in Michigan and South Carolina.
Moody's estimates that in the event of an extended breach of the debt limit, some large states could lose each hundreds of thousands jobs. According to the report, Florida could lose 474.700 jobs. New York may shed 398.300. Ohio, Pennsylvania, and Georgia will each lose over 200,000.
"A real threat"
Moody's now assigns a 10% chance of a breach in the debt ceiling. This is up from 5%.
Mark Zandi, chief economist at Moody's Analytics, wrote about the threat in a report.
A breach and a default are not the same.
Zandi wrote to CNN that a breach occurs if the Treasury Department does not pay a creditor in a timely manner, whether it is a Social Security beneficiary or an electric bill for a Government building in Omaha.
Zandi explained that a default only occurs if Treasury does not make timely payments on its debt.
Zandi stated in the report that even though a long standoff is no longer a certainty, it's still possible.
Moody's issued the new warning a day following a meeting between President Joe Biden, Congressional leaders and other officials that ended on Tuesday without any progress being made on a deal to raise the debt ceiling.
Zandi stated that, although there were some signs of concern on the financial markets at the time of the deadline estimate for June 1, investors appeared to be 'largely unruffled.'
Market turmoil will probably be what is needed to get the political will that the lawmakers need to act.