Which do you want to hear first: The bad news? Or the terrible news?
The bad news is another government shutdown is on the way. The terrible news is the U.S. is heading toward defaulting on its debt, which will lead to an economic disaster.
The United States has never in its history defaulted on its debts. But it’s about to, unless something changes.
A government default on credit is worse than the most terrifying disaster movies you’ve ever seen. It means the government won’t pay its debts when they’re owed. It means the total loss of trust and confidence in the United States by other governments and foreign financial markets.
In three words, it will be “a catastrophic blow:”
- Recovery from the COVID-19 pandemic will be “upended”;
- The nascent economic recovery will end;
- Hard-won job gains will be lost; unemployment will “surge”;
- The global economy will be sent into a tailspin, and;
- Even if the default is resolved quickly, Americans will pay for it “for generations”.
The above sentences are paraphrases — in some cases the exact wording — of Moody’s Analytics, which provides “financial intelligence” to the clients of Moody’s Investors Service, one of the nation’s big three credit rating agencies for bonds.
Its Sept. 21 analysis is titled, “Playing a Dangerous Game with the Debt Limit.”
Who’s playing this dangerous game? Mitch McConnell (Ky.) the Republican leader of the Senate.
McConnell is refusing to raise the debt limit, which, for the past 100 years, has been a bipartisan undertaking: To pay what we owe when it’s owed. Yet, McConnell has voted to raise the debt limit repeatedly by trillions of dollars in the past. It’s only when Democrats are in charge that he has a problem.
The Los Angeles Times reports McConnell “emphasized that Republicans think the debt ceiling should be raised, but they don’t want to be the ones to do it,” and “it’s the Democrats’ responsibility” because they are “the ones trying to vastly increase federal spending.”
It’s like this: A couple decides they need a new car. They go to the auto dealer. They agree on a car and price, and both sign the contract to pay for it. But, when it comes time to pay what they owe, the husband refuses to mail the check — protesting that the wife spent too much money for the car.
McConnell is refusing to pay for debts he, personally, voted for.
In fact, Democratic spending accounts for only three percent of the debt incurred in the last fiscal year. “Most of that [past two years] debt growth is a result of the pandemic and bipartisan COVID relief,” says the nonprofit Committee for a Responsible Federal Budget.
It’s that simple. Republicans, including McConnell, have voted to raise the debt repeatedly. During the Trump administration, Republicans, including McConnell, voted to suspend the debt for two years. That suspension ended only on Aug. 1.
Now, Republicans are saying they won’t pay for what’s owed, which is money they spent, amounting to 97 percent of the current debt. McConnell and the Senate Republicans have an obligation to pay for balances they mostly incurred.
In 2011, we faced the same situation: The debt limit needed to be raised so the Treasury could pay the bills for things purchased on credit. McConnell, Speaker John Boehner (R-Ohio) and Senate Democratic Leader Harry Reid (Nev.) reached an agreement several days before the U.S. would default on the debt.
But, Boehner left their meeting and told the press that Reed wasn’t negotiating in good faith, that the Democrats had not put forth any serious proposals. Boehner said this even though McConnell and he privately agreed to budget compromises in return for raising the debt. Then, with only two days left before the U.S. would default on its just debts, McConnell and Boehner publicly agreed to what they had privately worked out days before. But, the damage had been done.
The spectacle of the U.S. being unable to get its act together on something so fundamental as paying its debts, caused a loss of confidence in America’s financial stability. Standard and Poor downgraded the United States credit rating.
As a result, it became harder for the Treasury Department to sell bonds to raise money. The Government Accountability Office estimated that the brinkmanship game McConnell played cost the United States $1.3 billion in 2011, and would cost even more in the following years.
The Bipartisan Policy Center estimated that the chicken game McConnell played in 2011 raised Treasury borrowing costs by nearly $19 billion dollars over a decade.
If McConnel knowingly (and it was knowingly) incurred this expense to get his way on the budget in 2011, he’ll not stop at risking a total economic meltdown in 2021, which he’ll blame on the Democrats.
The Democrats have offered the same solution that McConnell and the Republicans voted for in 2019: A suspension of the debt ceiling (not raising the debt limit) until after the 2022 election. That would take paying our incurred bills out of partisan politics.
We must demand that the cooler heads prevail — including those of moderate Republicans and genuine fiscally conservative Republicans — because paying what you owe when it’s owed is as fiscally conservative as it gets.
Donna Brazile is a political strategist, a contributor to ABC News and former chair of the Democratic National Committee. She is the author of “Hacks: Inside the Break-ins and Breakdowns That Put Donald Trump in the White House.”