GOP and Dems acknowledge grave risks of debt ceiling positions, but dig in anyway

Debt ceiling debate is ‘game of chicken’: Expert

Committee for a Responsible Federal Budget President Maya MacGuineas discusses the issues that come with the debate over the debt ceiling, from financial uncertainty to a loss of credibility for the U.S.  

Top Republicans and Democrats acknowledged this week that their positions on how Congress should raise the debt limit are fraught with major risk to the economy, including job losses and increased borrowing costs. 

But both sides are digging in on what amounts simply to political posturing, even as a potential government and debt default loom.

"We all agree America must never default. The debt ceiling needs to be raised," Senate Minority Leader Mitch McConnell, R-Ky., said Wednesday. Republicans are refusing to vote for any legislation that contains a debt ceiling increase to protest Democrats' spending, which they say is unprecedented in its volume and level of partisanship. 

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"I completely agree with the leader that we should never default on our debt," Sen. Rick Scott, R-Fla., echoed moments later.

"If the debt ceiling's not raised, there will be bad things that happen in this country," Scott added, before railing against the consequences of massive government spending and saying that Republicans won't vote to raise the debt ceiling. 

The comments from the ringleaders behind the GOP's insistence that Democrats raise the debt limit on their own make clear that Republicans are acutely aware of the consequences of a debt default. Democrats have said they are concerned about the risks of a default too.

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"If interest rates go up due to a default by only 1%, that adds an additional $200 billion a year minimum on interest rates," Sen. Mark Warner, D-Va., said. "You want to talk about an irresponsible spending program? That over 10 years is over $2 trillion, simply by being irresponsible." 

Democrats are saying they will only bring up legislation to raise the debt limit in a bipartisan manner, though they can raise it on party lines due to their majorities in both the House and Senate. 

"The bottom line – this will hurt our economy dramatically," Senate Majority Leader Chuck Schumer, D-N.Y., said. "Default over a period of time would lead to six million jobs lost, send unemployment to 9%, take $15 trillion out of the economy. Who would want to do that? It could stop payments to Social Security recipients, stop payments to veterans, raise interest rates." 

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But nevertheless, neither Republicans nor Democrats have shown any indication that they'll budge on their positions, as the country hurtles toward a situation that could harm the United States' credit rating even if it doesn't default on its debt. 

"My advice to this Democratic government… don't play Russian roulette with our economy," McConnell said. "Step up and raise the debt ceiling to cover all that you've been engaged in all year long. So no effort on their part to describe our position as irresponsible makes any sense… They have an obligation to raise the debt ceiling and they will do it."

Asked Tuesday whether Democrats have any backup plan for how to raise the debt ceiling, Schumer shot back: "Ask Leader McConnell. the bottom line is very simple. It should be bipartisan. They don't have any good arguments. We are pursuing it… to get bipartisan support." 

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"This is how it's always been done in the past and it should not be deviated from, plain and simple," Schumer added, referring to bipartisan increases of the debt limit. 

Effects from this standoff could start being felt at the end of this month, when the government will shut down if Congress doesn't pass a continuing resolution – the vehicle Democrats want to use to raise the debt limit. They will get far worse later in October if the U.S. gets dangerously close to a default or if it does in fact default. Treasury Secretary Janet Yellen has said the U.S. is on track to default sometime in October. 

Sen. Thom Tillis, R-N.C., said "default's not gonna happen," when asked Wednesday whether he trusts Democrats will take actions to raise the debt limit if Republicans don't. 

Pressed further, he added: "I expect them to do it, trust may be a strong word."

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