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A Peak At Our Doomsday Scenario [1]

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Date: 2023-01-19

We’re not going to sugarcoat shit and call it fudge.

The United States reached its debt limit today. That means the Treasury Department must now take what it calls “extraordinary measures” to keep the country from defaulting on its debt. It means that if Congress doesn’t raise or at least temporarily suspend the debt limit within the next few months we’ll be facing an economic disaster.

Treasury Secretary Janet Yellen has told Congress that officials will alter certain federal investments to preserve the nation’s credit until summer -- largely through technical moves that will buy lawmakers time to reach an agreement on how much the government is allowed to borrow, the Washington Post reported today.

Yellen wrote to House Speaker Kevin McCarthy that there’s “considerable uncertainty” about how much room these measures will provide.

You can read the Post’s story here.

The problem is House Republicans want to use the debt limit to bargain for big spending cuts – including possibility to Social Security and Medicare. The Biden administration has countered that it has no interest in negotiating with paying our bills.

This is a really big deal.

The media has rightfully been highlighting this story. It’ll continue to be a big story until a resolution is reached. News outlets may eventually move on to other things, and we may quit listening or tune out the constant and necessary refrain of the sheer stupidity that we’re facing from the Right.

We can’t let that happen. We can’t let this threat be forgotten. The Republican Party is playing Russian Roulette with the gun pointed at us for the whole game.

What are the consequences if this gross governance malpractice leads to the United States defaulting on its debt? Third Way, a public policy think tank, said that it “will have brutal and wide-ranging consequences for families and the U.S. economy.”

It “would be more harmful to the U.S. economy than the 2008 Lehman Brothers collapse,” according to Standard & Poor’s Global’s chief economist. “It would be a self-fulling economic catastrophe.”

Third Way projected these consequences of defaulting on our debt:

*The United States could shed as many as 3 million jobs -- undoing nine months of employment growth.

*A typical worker near retirement with 401(k) savings could lose $20,000.

*The average new 30-year mortgage would cost an additional $130,000.

*It would become harder to borrow for everything from small business loans to student loans.

*American consumers will see higher price tags for everyday items.

*The national debt would increase by $850 billion.

Feel free to read that again. In fact, I’d advise reading the whole report.

You can see it here.

This is what the GOP is willing to do to the American people. For what? Fiscal responsibility? These guys cheered on former President Donald Trump adding nearly $8 trillion to our debt in just four years, including $2 trillion for a tax cut slanted to favor the rich and corporations.

These are the same folks who just cut Internal Revenue Service funding, a move that will limit its ability to go after rich tax cheats and is expected to add $114 billion to the same deficit due to the intentionally inflicted limitations on enforcement of our tax code.

There are some members of the GOP who actually think this is a good idea. They either don’t know or don’t care about the damage that will come from the United States not being able to pay all its bills.

To some of them this is a way to gain national attention, to be interviewed by Right-wing media, and to raise money from their supporters/suckers by bragging how they’re courageously holding the line on spending.

The debt limit – which currently stands at $31.4 trillion – is the statutory threshold which limits the country’s borrowing ability to pay back its existing debt. This needs to be emphasized: The debt limit is the amount of money the United States can borrow to pay back EXISTING debt. This isn’t new spending. This is money already borrowed and spent, including for the previously mentioned GOP contributions to the deficit.

This means that failing to raise the debt limit would make the government incapable of meeting its current financial obligations. This hasn’t happened in the 100 years since the debt limit was enacted.

Even the possibility of this happening can be damaging. Yahoo News reported that in 2011, when debt limit negotiations weren’t going well, Standard and Poor’s downgraded the country’s AAA ranking to AA+. This led to a massive stock market drop. It happened even though Congress eventually raised the limit without defaulting.

In the past, the Biden administration has said defaulting on the debt would not only cripple basic federal functions -- everything from military preparedness to keeping national parks up and running -- but would also cause interest rates to spike for borrowers looking into home and auto loans and potentially delay crucial payments like Social Security, Medicare, Medicaid, and veterans’ disability benefits, Yahoo reported.

You can read the Yahoo News story here.

Now, if I had to bet $100 on how this will end up, I’d first have to borrow the money from you, and then I’d bet the country won’t end up defaulting. But it certainly feels like the possibility is there when you consider the fanaticism of a portion of the GOP, the spineless McCarthy’s inability to lead, and that we may have to count on having enough Republicans who aren’t immoral political cowards to step forward and vote to raise the debt limit.

Is that asking for too much? Let’s hope not.

In the meantime, keep your eyes on this one.

We can’t afford not to.

***

Thank you for reading my post. You can see more of my writing on my blog: Musings of a Nobody.

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[1] Url: https://www.dailykos.com/stories/2023/1/19/2148097/-A-Peak-At-Our-Doomsday-Scenario

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