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Anne Villamil is nothing if not frank, and her assessment of the federal government’s debt crisis is stark and unequivocal. In her view, failing to raise the current U.S. debt ceiling would result in the United States defaulting on its debt obligation for the first time in history, a "disaster" resulting in “a huge loss of reputation” that would "send global markets into a tailspin." Ms. Villamil, an economics professor in the University of Iowa’s Henry B. Tippie College of Business, served as the keynote speaker for the Corridor Business Journal’s annual Economic Forecast Luncheon, which drew more than 600 attendees Jan. 25 to the DoubleTree by Hilton convention center in downtown Cedar Rapids. The debt ceiling caps the total amount of allowable outstanding U.S. federal debt. The U.S. hit that limit – $31.4 trillion – on Jan. 19, Brookings reports, but the Department of the Treasury is implementing “extraordinary measures” so the debt limit isn’t yet binding. The Treasury estimates that those measures will be sufficient at least through early June. Sometime after that, unless Congress raises or suspends the debt limit before June, the federal government will officially default on the nation’s debt obligations. Congress and President Joe Biden continue to debate possible solutions to the crisis, but as Ms. Villamil noted, the U.S. faced a similar situation in 2011 with similar precursors – a financial crisis in 2007 that led to a recession in 2008 and 2009. “We had accumulated a lot of debt,” Ms. Villamil said. “And the idea was, let's try and lower that by threatening to default. We found a solution (then). But we need a political agreement on how to control spending, account for taxation, and fundamentally focus on economic growth, which means focusing on innovation, the quality of our labor, and our capital markets. We can do it because we've done it before. We’ve got to compromise.” Ms. Villamil also said the U.S. economy is not yet in recession, and “persistent growth” following the economy’s post-COVID decline is a positive sign for the future. She noted that the Federal Reserve has aggressively targeted high inflation through a series of interest rate hikes, and in response to an audience question, she said she expects commissioners to continue targeting an ongoing goal of lowering inflation. “I actually have a lot of faith in the Fed,” Ms. Villamil said, noting that the Reserve’s Board of Governors and 12 regional banks comprise an organization with a “clear mandate” of price stability. “That's why the Fed at every turn says we must get back to 2% (inflation), because that is the Fed’s job, and (Federal Reserve chairman) Jerome Powell has been honest about the ‘choose your poison’ alternative,” she said. “No one wants a recession. No one wants inflation. But if he needs to make the choice, he's indicated that we would have a recession in order to get the economy back on stable ground. You can talk a lot about regulatory failures, but when we had a financial crisis, the Fed came up with many many innovative policies to stabilize the economy.” Ms. Villamil also predicted a slight increase in unemployment over the next few years. “That's important, because people who have jobs can continue to pay their mortgages and buy consumer goods to keep the economy going,” she said. Still, she noted that moving forward, the United States must address its “structural budget deficit, a fundamental imbalance between spending and taxation. And that means that as a country, we're going to need to make some difficult policy choices.” “There are three ways to solve a structural deficit,” she added. “One is economic growth, another is to cut rates of government spending, and the other is to raise more taxes. And that involves real choices that people need to be informed about.”