WASHINGTON, D.C. – U.S. Senator Amy Klobuchar (D-MN), Vice Chair of the U.S. Congress Joint Economic Committee (JEC), today released a report analyzing the economic consequences of brinksmanship over the debt ceiling. Drawing on events from the 2011 debt ceiling impasse, the report suggests that the mere prospect of a default has the potential to roil global markets and cause interest rates to rise on everything from home mortgages and credit cards to borrowing costs for businesses.
Klobuchar held a hearing today to discuss the report and further examine the costs of debt ceiling brinksmanship. Witnesses included Mark Zandi, Chief Economist at Moody’s Analytics, and Donald Marron, the Director of Economic Initiatives at the Urban-Brookings Tax Policy Center and a former economic advisor to President George W. Bush.
“We cannot afford to bring our country to the brink of default by playing Russian roulette with the debt limit,” Klobuchar said. “Democrats and Republicans need to come together to find bipartisan solutions to reducing our debt, but holding America’s economy hostage to score political points is just plain wrong and needs to stop.”
“Any delay in raising the debt ceiling would have dire economic consequences,” Zandi said at the hearing. “Business and investor confidence would be hit hard, putting stock, bond and other financial markets into turmoil.”
If the government defaults, 57.5 million Americans are at risk of not receiving their monthly Social Security payments, and 3.4 million veterans are at risk of not receiving disability benefits.
The 2011 debt ceiling impasse resulted in a downgrade of the U.S. credit rating, a 2,000 point drop in the Dow Jones Industrial Average and an added $1.3 billion in taxpayer-funded borrowing costs for the U.S. Treasury. Today’s report warns that a similar showdown in 2013 could lead to the same waste or worse. The full report is available here.
Klobuchar was one of 14 senators that fought for the creation of the bipartisan Debt Commission, and was also part of a bipartisan group of 45 senators who pushed for a balanced debt reduction plan in Congress.