Washington, D.C.—On Wednesday, May 17, Senator Martin Heinrich (D-NM), Chairman of the U.S. Congress Joint Economic Committee (JEC), held a hearing titled “Counting the Costs: How a U.S. Default Crisis Harms American Families and Businesses to explore the economic costs of breaching the debt limit and the drastic cuts to important federal programs, during which Committee members and witnesses called for a clean debt ceiling raise and warned of the harmful effects of a default.
The United States reached its $31.4 trillion debt limit in January, and the Treasury has been utilizing extraordinary measures since then to ensure that the federal government can continue to pay its bills. Those measures will soon run out, and the federal government may not be able to meet its existing obligations as soon as June 1, unless Congress raises the debt limit. Failing to do so would cause widespread economic harm – costing millions of Americans their jobs, saddling households with higher borrowing costs, jeopardizing payments to millions of seniors and veterans, depressing economic growth, and threatening the country’s credit rating.
“Let’s be clear: A default will drive up costs for working families – from mortgages, car loans, student loans, and small business loans to the cost of consumer goods. It will also cost jobs – millions of them,” said Joint Economic Committee Chairman Heinrich during his opening remarks, which can be found in full as prepared here. “For two years now, Republicans have been predicting a recession. Now, they have manufactured a default crisis that could cause that recession. Using the economic wellbeing of the entire nation as a bargaining chip is wrong and should not be condoned.”
Congressman Don Beyer, Senior House Democrat on the Joint Economic Committee, also criticized Republicans for their willingness to cause a default. “Republicans’ willingness to intentionally cause a catastrophic default is the most serious threat to the U.S. economy today,” he said. “Threatening to cause a recession and plunge millions of American workers into unemployment on purpose to extract a ransom should be beneath every member of this body. Kevin McCarthy could make this showdown end at any time by raising the debt limit without poison pills, but he still stands alone as the only party leader in Congress expressing willingness to cause a default. We are now at a point where just the brinksmanship risks a credit downgrade which could drive up costs for regular people. The country deserves better from its leaders.”
Dr. Wendy Edelberg, Director of the Hamilton Project and a senior fellow at the Brookings Institution, warned during her witness testimony that raising or eliminating the debt ceiling without delay would be the only effective solution. “The workarounds that have been proposed – the platinum coin, increasing borrowing despite the debt limit, prioritizing payments – either bring significant legal uncertainty or are not sustainable solutions. These unlikely workarounds do not avoid the chaos that is inherent to the debt ceiling binding,” she said. “The only effective solution is for Congress to increase the debt ceiling without delay or, better yet, abolish it.”
“Tens of millions of people in the United States rely on federal programs to achieve a basic standard of living, particularly women and Black and Latino working people, who are disproportionately represented in low-paid jobs. These programs are the foundation of our nation’s social protection system, which enables families with low incomes to stabilize their lives, maintain employment, advance in the labor market and help their children thrive, said Indivar Dutta-Gupta, President and Executive Director of the Center for Law and Social Policy (CLASP) during his witness testimony. “The deep spending cuts and work-reporting requirements proposed in the House Republican debt ceiling bill would undermine the well-being of the nation and our ability to raise revenues necessary to invest in individuals and families. Tying the necessary task of raising the debt ceiling to spending cuts is dangerous and would increase costs, deprivation, and suffering for American families while undercutting our nation’s competitiveness. Congress should not pass any deal that increases hardship – never mind one that asks struggling families to foot the bill so the richest corporations and households can evade paying taxes.”
The full hearing can be viewed online here.
About Chairman Martin Heinrich
U.S. Senator Martin Heinrich has served the people of New Mexico in the United States Senate since 2012. In addition to his role as Chairman-Designate of the U.S. Congress Joint Economic Committee, Heinrich also serves as Chairman of the Subcommittee on Agriculture, Rural Development, and Food and Drug Administration on the Senate Appropriations Committee, and as a member of the Senate Energy and Natural Resources Committee and the Senate Select Committee on Intelligence. Prior to his election to the U.S. Senate, Heinrich served two terms in the U.S. House of Representatives, four years as an Albuquerque City Councilor, as New Mexico’s Natural Resources Trustee, and in AmeriCorps with the U.S. Fish and Wildlife Service.
About the U.S. Congress Joint Economic Committee
The U.S. Congress Joint Economic Committee is Congress’s bicameral economic think tank. It was created when Congress passed the Employment Act of 1946. Under this Act, Congress established two advisory panels: the President's Council of Economic Advisers (CEA) and the JEC. Their primary tasks are to review economic conditions and to recommend improvements in economic policy. Chairmanship of the JEC alternates between the Senate and House every Congress.??