Roll Call: Levin -- Republican Strategy Is a Default, Plain and Simple
The Republican majority in Congress has said that the inability to govern is following the same failed strategy time and again. Yet, once again House Republicans are putting the full faith and credit of the United States at risk. Their repeated behavior is reckless and irresponsible, and has had real consequences.
Earlier this month, Republicans in the Ways and Means Committee voted unanimously to advance a bill that would put the United States on a path to default. The so-called Default Prevention Act says once the debt limit prevents us from paying all of our bills, the Treasury Department must continue to fully pay all obligations to China and other foreign bondholders, while permitting default on other debts — such as those owed to active duty troops, disabled veterans, scientists searching for cures for deadly diseases, doctors and nurses who treat Medicare patients, and small businesses providing services to our government.
The GOP’s claim is that by paying some of our debts but not others, the U.S. avoids default on our bonds. But their strategy is simply default by another name. “The idea that financial markets would not question our overall creditworthiness (and would not wonder how long they will be protected from such nonsense) is fanciful,” said Neil Buchanan, an economist and law professor at The George Washington University. And MIT economist Simon Johnson warned at a hearing that if the U.S. were to default on any obligation, it would have a catastrophic effect on the credit market in the U.S. and much of the world. Without access to credit, American businesses would close their doors, unemployment would skyrocket, and our gross domestic product would decline sharply.
We cannot afford to put our country in such a situation — the consequences would be devastating.
Republicans have threatened default — and damaged our economy — twice before. In 2011, Republicans brought us to the brink of default, and stock markets plunged and S&P downgraded our credit rating for the first time ever. In 2013, Republican default threats combined with a 16 day government shutdown cost 120,000 American jobs and slowed GDP growth — just as the economic recovery was taking hold. The 2013 impasse also increased the cost of borrowing for the government, for businesses, and for individuals with home mortgages, car loans and other debt. And perhaps most importantly, it cost us credibility — for the first time in our history, investors concluded that short-term Treasury bonds might be too risky to buy because of the risk of default.
The last time Republicans tried this approach, Treasury Secretary Jacob J. Lew made clear to Speaker John A. Boehner, R-Ohio, that “any plan to prioritize some payments over others is simply default by another name.” We should be acting responsibly to make sure that the United States continues to pay all of its bills, on time and in full. We should not even consider a bill that would prepare for default, damaging the entire global economy and putting foreign investors above hardworking Americans.
The Republican majority seems to think default is an acceptable outcome, so long as China and the other foreign bondholders get paid. The rest of us know better.
The original op-ed was posted in Roll Call here.