Debt Ceiling Crisis To Stop U.S. Economy's Recovery

A full-blown debt ceiling crisis has the potential to stop the US economy in its tracks, the top economist at Goldman Sachs warned, Matt Egan reported for CNN Business.

Photo Insert: The US hit the debt ceiling last week, forcing Treasury Secretary Janet Yellen to make accounting maneuvers to avoid breaching that $31 trillion borrowing limit.

"If there were any doubt about the US government's ability or willingness to make interest and principal payments on time, that could have very, very adverse consequences," Jan Hatzius, the chief economist at Goldman Sachs, told CNN in an interview.

If Congress fails to lift the debt ceiling in time, Hatzius said investors will worry there is a chance of a missed payment on US Treasuries — which are "maybe the most important asset in the global economy."

Asked if a default or even a near default could cause a recession, Hatzius said yes.

"That is the worry: That you get turmoil in financial markets, a big tightening in financial conditions and that adds to downward pressure on economic activity," he said. "That is certainly the worry. It's not our expectation."

The US hit the debt ceiling last week, forcing Treasury Secretary Janet Yellen to make accounting maneuvers to avoid breaching that $31 trillion borrowing limit.

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