Heinrich Urges an End to Default Threats
WASHINGTON - It has been over three months since U.S. Treasury Secretary Janet Yellen notified Congress that the United States would have to use “extraordinary measures” to avoid defaulting on its existing obligations. If Congress doesn’t act, and despite these “extraordinary measures,” the Bipartisan Policy Center predicts the United States could go into default as early as this summer.
Speaker of the House Kevin McCarthy (R-Calif.) announced today that House Republicans are moving forward with a legislative proposal to tie raising the debt limit to a broad package of massive spending cuts and unpopular policies. This only increases the threat of a potential default.
According to a report by the Joint Economic Committee (JEC), default would be catastrophic. In addition to disrupting payments to the military, veterans, and seniors, Moody’s Analytics economist Mark Zandi says that a default on U.S. debt obligations would trigger a global market panic. That could mean a loss of more than 7 million jobs, an unemployment rate of over 8%, the elimination of $10 trillion in household wealth, and a decline in real GDP of more than 4%.
In fact, the impacts start long before a default. According to the JEC report, just the threat of a default could hit the retirement savings of those close to retirement, and increase the costs of small business loans, mortgages, car loans, and private student debt..
In response to the report, JEC Chairman and New Mexico’s senior senator, U.S. Senator Martin Heinrich (D-N.M.), criticized Republicans for creating “a default crisis that will undermine confidence in America’s commitment to pay its bills and drive up costs for working families... Jobs are in peril, people on Social Security and Medicare could see their benefits disrupted, and veterans’ benefits could be in jeopardy.”
Congress has not yet acted to put an end to this default crisis, and Senator Heinrich is pushing to do something about it. Today, he joined U.S. Senator Brian Schatz (D-Hawaii) to reintroduce legislation to permanently eliminate the default threat by repealing the national debt ceiling, an arbitrary limit set by Congress on the amount of funding that the United States Treasury may borrow.
In reintroducing this legislation, Senator Heinrich said, “Democrats are focused on creating jobs and lowering costs for Americans. Meanwhile House Republicans are barreling towards default. We can’t let Republicans keep gambling with Social Security, Medicare, and more with their default threats. We need to eliminate these manufactured crises once and for all.”
The lead sponsor of the legislation, Senator Schatz said, “Defaulting on our debt would be an economic catastrophe for everyone – families, veterans, seniors. Congress has the chance to debate federal spending, and it’s well before the bill comes due. Republicans are using the debt limit to hold the country hostage. We need to stop playing this very dangerous game with the nation’s economy and get rid of the debt ceiling.”
The United States is one of only two democratic countries with a statutory debt ceiling, and the only one that could single-handedly cause a global recession. Since 1960, Congress has acted more than 75 separate times to raise, temporarily extend, or revise the definition of the debt limit – 49 times under Republican Presidents and 29 times under Democrat Presidents. In 2011, the crisis surrounding raising the debt ceiling led credit rating agency Standard & Poor’s to downgrade the U.S. government’s credit rating for the first time ever.
In addition to Schatz, Heinrich, and Luján, the legislation is cosponsored by U.S. Senators Ben Ray Luján (D-N.M.), Bob Casey (D-Pa.), Mazie K. Hirono (D-Hawai‘i), Michael Bennet (D-Colo.), , Chris Van Hollen (D-Md.), Dick Durbin (D-Ill.), Martin Heinrich (D-N.M.), Elizabeth Warren (D-Mass.), Chris Murphy (D-Conn.), and Tina Smith (D-Minn.).
