Chance of U.S. government default less than 10 percent, economists say: Reuters poll

Tue Oct 1, 2013 1:05am EDT
 
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By Andy Bruce

LONDON (Reuters) - There is a less than 10 percent chance that Washington's budget feud will lead to the United States defaulting on any of its debt, according to a majority of economists polled by Reuters since Friday.

Barring an 11th-hour deal between deadlocked Republican and Democrat lawmakers to continue funding the federal government, a partial government shutdown will start Tuesday.

However, 40 out of 51 economists at major banks and research institutions said there is a less than one-in-10 chance that a government shutdown on Tuesday will escalate into a potentially ruinous default on government debt payments later this month.

U.S. Treasury Secretary Jack Lew has said the Treasury will run out of money to pay its debt by October 17 if Congress fails to raise the debt ceiling.

The remainder of the economists polled cited a greater risk, although no respondent thought the risk was greater than 50-50.

"We think the chances of a U.S. default are zero and a government shutdown would be not long-lasting -- amounting to a quasi non-event in economic activity," said Peter Cardillo, chief market economist at Rockwell Global Capital.

Other respondents said a shutdown would have some impact.

"A short government shutdown will have more political than economic ramifications, though assume a quarter (percentage) point removal of growth for every week of shutdown," said Donald Ratajczak, consulting economist and professor emeritus of Georgia State University.   Continued...

 
U.S. National Park Ranger Mark Ragan checks his watch while on duty in front of the Lincoln Memorial in Washington September 30, 2013. REUTERS/Kevin Lamarque