Statement on the Debt Ceiling Crisis
By Tom Conroy
State Representative and Candidate for U.S. Senate
Lift the debt ceiling! I wonder what it will take for Congressional Republicans to stop playing chicken with the American economy and put politics aside to do what is best for the American people, the future of our country, and the global economy. With less than a week until the U.S. defaults on its debt obligations, it is past time to get this done. Significant damage has already occurred. Our reputation as a stable, reliable, and responsible nation has dropped a notch or two. Let’s put partisanship aside and do the right thing.
The President has met Congressional Republicans more than half way, and it is time for them to step up and fulfill their obligations as legislators. With the economy in a fragile state of slow recovery, it is dangerous and irresponsible to wait until the last minute to raise the debt ceiling. We should not put our economic strength and stability in jeopardy.
When I worked in the U.S. Senate in the 1980s, there was considerable bipartisanship. There were liberal Republicans and conservative Democrats. Negotiations were polite and frequent. Compromise and comity were the order of the day. Bills were written. Laws were signed. Policy priorities were generally in line with the public’s priorities. Stuff got done. We need to return to that culture. If I were there now, I would be diligently talking to any and all Republicans with whom I had established relationships in order to put this crisis behind us.
With the threat of a credit rating downgrade looming, it is necessary for Congress to reach a deal that includes a long-term debt reduction plan and increased revenues. Closing unnecessary tax breaks such as those to oil companies, which are the most profitable corporations in world history, would ensure that safety net programs, such as Medicare and Social Security, are held harmless during a time when these programs are most needed. In the midst of an uncertain recovery from the recession, markets are already skittish, and the longer Congress waits to raise the debt limit and form bipartisan solutions to address the nation’s debt, the higher the risk of severe and lasting negative economic repercussions. A default or downgrade would have devastating economic effects worldwide.
Here’s what is likely to happen if we don’t resolve this now. First, the creditworthiness of U.S. debt would be downgraded from AAA to AA. This would force the U.S. Treasury to raise interest rates on newly issued treasury bills in order to continue to attract investors (who might otherwise buy more creditworthy bonds, from, for example, Japan). The higher T-bill rates would cause U.S. banks to raise their interest rates, in order to continue to attract bond investors (who would otherwise invest in T-bills and collect higher interest payments). Once banks raised their interest rates, they would lend less, because their liabilities would rise, their reserves would need to increase, causing their cash for lending to fall. These banks would raise costs for and restrict lending. Fewer businesses would want to or be able to obtain credit, and the business cycle would slow dramatically, triggering another recession and further extensive job losses. And this could all happen in a matter of days, not weeks or months.
This is fundamental macroeconomics. I wonder if the Republicans in Congress understand it. Ask Scott Brown if he understands it or can explain it.
Our country needs jobs right now, and every day that negotiations to raise the debt limit are stalled adds to the insecurity of financial markets, paralysis in the business sector, and consumer anxiety. The real job creators are not the super-rich or huge corporations that Congressional Republicans are risking the American economy to protect. We have seen time and time again that as profits rise to unprecedented levels, these huge corporations and the super-rich CEOs that run them continue to lay off employees and ship jobs overseas. The real job creators in Massachusetts and around the nation are small businesses. These companies that invest in our communities and are loyal to and supportive of their employees — these are the entities that deserve governmental protection and support. And the best way to support them and their employees is to raise the debt ceiling, cut back our spending on foreign wars and overseas military operations, and enact effective, long-term debt reduction legislation that increases revenues from those who can afford to contribute more towards our national economic security.
I applaud President Obama’s insistence that the debt reduction deal must include long term solutions and I support efforts to raise revenues. We cannot effectively address our nation’s debt crisis without tackling the issues that got us into this mess. Non-defense discretionary spending accounts for only 15% of the national budget ($369 billion per year* and has not changed in a decade), whereas the Bush era tax breaks to the super rich cost the nation almost $2.5 trillion from 2001 to 2010 according to Citizens for Tax Justice (http://www.ctj.org/pdf/bushtaxcutsvshealthcare.pdf). The wars in Iraq and Afghanistan have cost the nation $1.3 trillion (http://www.fas.org/sgp/crs/natsec/RL33110.pdf). It is time to end the country’s military offensives abroad and invest those resources here at home.
It is time for the Republican majority in the House of Representatives to put partisan bickering aside and do what they were elected to do: represent the best interests of the American people.
