The U.S. Congress Joint Economic Committee (JEC)—led by Chairman Don Beyer (D-VA)—released a new issue brief highlighting how defaulting on the federal debt would create a financial crisis on par with that of 2008, resulting in catastrophic economic damage with millions of jobs lost, businesses shuttered and a banking system in chaos.
The debt limit allows the federal government to make good on financial obligations Congress has already incurred. Failure to raise the debt ceiling would make it impossible for the federal government to keep its existing financial obligations, including payments to the military, veterans, Social Security and health programs such as Medicare and Medicaid, which make up the majority of federal spending.
“For 18 months, the biggest threat to the U.S. economy was the pandemic, which led to the worst recession in this country since the Great Depression,” said Chairman Beyer. “Today, the greatest threat comes from the minority party intentionally risking a default that could undo all of this year’s progress on job creation, wreck our economy, and send the country into an even worse economic crisis.
“The latest issue brief from the Joint Economic Committee details how obstructionism to raising the debt limit threatens economic harm to millions, including potentially halting the income of Social Security recipients, military families, and the federal workforce.
“By filibustering legislation that would prevent a default, they are gambling with the full faith and credit of the United States. This is poor economic stewardship. The responsible course of action is to increase the debt ceiling to prevent a catastrophic default.”
Since 1960, Congress has raised the debt limit 78 times. According to recent estimates, defaulting on the federal debt could result in six million jobs lost, an unemployment rate of nearly 9%, the elimination of $15 trillion in household wealth and a decline in real GDP of 4%.
Past debt-limit brinkmanship crises led to uncertainty for businesses, declines in the stock market and consumer confidence and higher borrowing costs for taxpayers and consumers. Even though a default was ultimately avoided, it resulted in the first-ever downgrade of the U.S. credit rating and cost the country billions of dollars in lost economic activity.