The US Treasury warned Congress on Thursday that failure to raise the nation's debt ceiling in the coming weeks could result in a recession worse than that in 2008, dpa reported.
The warning came as government offices remained largely closed for a third day after Congress failed to reach agreement on a short-term budget deal to fund operations through mid-November. Republicans insist any agreement be tied to a delay or removal of President Barack Obama's healthcare reforms.
But for the White House and fiscal experts, even more worrisome than the shutdown is the looming crisis over raising the nation's debt limit on October 17 that could be wrapped into the budget negotiations if separate efforts on the budget fail.
A deadly car chase from the White House to the Capitol sent both houses of Congress into brief lockdown amid reports of shots fired on Capitol Hill. A woman who led officers on the chase was hit by police gunfire and had died, Police Chief Cathy Lanier said.
Obama warned of the economic fallout of the ongoing shutdown and called on Congress to act immediately to reopen the government.
"The longer this goes on, the worse it will be and it makes no sense," Obama said at a construction company in suburban Washington. "The American people elected their representatives to make their lives easier, not harder."
He noted there was "one way out" of the shutdown, calling on lawmakers to "take a vote, end this farce, and stop this shutdown right now."
Obama warned that conflict over raising the debt ceiling could be dramatically worse for the economy.
"If we screw up, everybody gets screwed up," he said. "The whole world will have problems."
Those sentiments were echoed by International Monetary Fund chief Christine Lagarde, who said the US could set off severe economic troubles worldwide if Congress fails to raise the government debt limit.
She repeated the crisis lender's advice for the US to "slow down but hurry up" in its budget reforms: Fewer short-term budget cuts, which have pared current economic growth, but more long-term savings including entitlement reforms.
"In the midst of this big fiscal challenge ... the ongoing uncertainty over the budget, over the debt ceiling, does not help," Lagarde said.
"The government shutdown is bad enough, but failure to raise the debt ceiling would be far worse and could very seriously damage not only the US economy but also the entire global economy."
The Treasury warned of "catastrophic" consequences, including a possible freeze of credit markets, a drop in the value of the dollar, an increase in interest rates and damage to financial markets.