Traders react as Federal Reserve Chair Jerome Powell is seen delivering remarks on a screen, on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., May 3, 2023. (Reuters)

A default o debt would impact the value of the US dollar, affect the United State's global image and create uncertainty around its world position which would lead to heavy turbulence in markets trading with the USD, US National Intelligence Director Avril Haines said on Thursday.

“Almost certainly it [default] would create global uncertainty about the value of the US dollar and US institutions and leadership, leading to volatility in currency, and financial markets and commodity markets that are priced in dollars,” Haines told a Senate Armed Services Committee hearing.

The President's Council of Economic Advisers (CEA), a federal agency led by a team of experts, issued a report on Wednesday warning of the possible consequences that would ensue from the US defaulting on its debt payments.

Some of the consequences listed in the report include a series of economic shocks that would result in 8 million job losses this year's summer, a 6% drop in GDP, and a plummet in the stock market to up to 45% in the third quarter of 2023.

Democrats and Republicans have been sparring for months over national spending and the public debt.

In January, after the US maxed out its borrowing limit at $31.46 trillion, the US Treasury announced launching "extraordinary measures" to prevent defaulting on debt. Yellen then decided that the Treasury would temporarily suspend payments that aren't urgent and divert the money for more pressing needs i.e. services needed to keep the government operating.

US President Joe Biden has requested Republicans to raise the debt ceiling, but Republicans in the House said they will refrain from doing so unless an agreement to cut government spending is laid out.

Yellen warned on Monday that the US is threatened by a debt default as soon as the start of June, to which the White House responded the very next day that it does not have the will to negotiate to extend the nation's debt limit.