WASHINGTON — Congress’ Joint Economic Committee released a report Thursday detailing the economic repercussions of defaulting on the nation’s debt, adding fuel to the fire as Democrats pressed Republicans to address the nation’s borrowing limit without tying action to spending cuts.
The report, from Democratic staff on the bipartisan Joint Economic Committee, says that a default on the debt would increase costs on everyday necessities, push up the unemployment rate, and disrupt payments on hundreds of federal programs including Social Security, Medicare and veterans’ benefits.
If the federal government defaults, Treasury would only be able to pay debts using existing funds and incoming revenue, the report says. Most federal spending goes toward paying for Medicare, Medicaid, Social Security, veterans’ benefits and the military, it notes.
“Incoming tax revenue may not be sufficient to fund ongoing payments to support the military, veterans, and seniors, maintain other government programs, and service existing debt,” it says.
Social Security pays out about $100 billion each month to beneficiaries and “payments could be in jeopardy” unless the debt limit is lifted, the report says.
“This is not that complicated. Raising the debt ceiling simply means that we will fulfill our most fundamental responsibility — that we pay our bills,” Minnesota Democratic Sen. Tina Smith said during a press conference on the report.
“Defaulting on the debt would cause a global financial crisis as bad as what we saw in 2008 or even more,” Smith added. “And what that means for folks in Minnesota — jobs lost, interest rates skyrocketing, homes lost, farms in default and the global confidence in the full faith and credit of the United States of America gone.”
Debt limit reached in January
The federal government ran out of borrowing authority when it reached the $31.385 trillion debt limit on Jan. 19. Since then the U.S. Treasury Department has been using extraordinary measures, which are essentially accounting maneuvers, to keep paying all of the country’s bills in full and on time.
That short-term work around will end as soon as mid-June, and at some point after that the nation would default on the debt for the first time ever, unless Congress takes action to raise or suspend the debt limit first.
While Democrats control the U.S. Senate and the White House, any legislation to raise or suspend the debt limit must move through the Republican-controlled U.S. House. There’s been little movement so far.
Speaker Kevin McCarthy, a California Republican, has repeatedly said the only way he’ll put a debt limit bill on the floor is if Democrats agree to spending cuts.
Democrats have insisted negotiations about future spending and addressing the debt limit, which allows borrowing to pay for the spending Congress has already approved, must remain on separate tracks.
Senate Majority Leader Chuck Schumer said Thursday that Democrats understand they need to negotiate spending levels as they have done for years through the annual appropriations process, but insisted those talks are not linked to addressing the debt limit.
“That should not be part of the debt ceiling debate,” Schumer said. “But, look, we’re going to have to come together — Democrats and Republicans — and hopefully pass a budget, not a (short-term bill) but an omnibus. We did it last year, and we will try to do it again.”
“First step is for them to put out a plan and there’s time for them to do it. They have to put out a plan,” Schumer added.
Heinrich cites bipartisan votes
New Mexico Democratic Sen. Martin Heinrich noted that Congress voted on a bipartisan basis to raise the debt limit three times during the Trump administration.
“Republicans in Congress voted overwhelmingly to raise the debt limit when President Trump was in office, while he added $7 trillion to the national debt,” Heinrich said.
“House Republicans are threatening to default unless they get their way, but they won’t even tell us what their way is,” he added. House Republicans haven’t released a budget resolution for the upcoming fiscal year or any of the dozen appropriations bills.
Virginia Democratic Rep. Don Beyer said that if the GOP wants to cut federal spending, there is a path to do that, but he pressed them to keep that separate from addressing the debt limit.
“If they want cuts, Congress has the purse strings — the appropriations process. They can pursue them constructively without hostage taking,” Beyer said. “But sadly they haven’t done that.”
“In fact, the only thing they’ve done in the House so far is advance a bill in Ways and Means … that would take us into default,” Beyer added. “This is their so-called debt prioritization bill, which would pay Chinese bondholders before they pay American troops and veterans.”
U.S. House Republicans advanced a bill out of the Ways and Means Committee earlier this month that would prioritize certain payments in the event Congress doesn’t take action to raise or suspend the debt limit. It hasn’t yet gone to the floor and wouldn’t stand a chance of passing the U.S. Senate.
‘Get up off of the floor’
Wisconsin Democratic Rep. Gwen Moore compared the way Republicans are behaving on the debt limit to how her great-granddaughter acts when she doesn’t get what she wants.
“I have a great-granddaughter that falls out and rolls on the floor and screams when she can’t have her way,” Moore said. “You know what I tell her, ‘Get up off of the floor because you’re not going to get it.’”
“We’re not going to sell our seniors down the road, we’re not going to sell our children down the road and we’re not going to send the world’s standard, our bond rating, we are not putting it up for sale,” Moore added. “Get up off the ground and pass this debt ceiling.”