WASHINGTON - Economists at a joint hearing held by the House Ways and Means and Senate Finance Committees today warned about the possibility of defaulting on our debt by not acting to raise the debt ceiling before the Aug. 2 deadline - a move many Republicans endorse. Senator McConnell on Wednesday said he bets “there won’t be a single Republican vote to raise the debt ceiling at the end of the day." Below are how two top economists characterized the possibility of the U.S. not meeting its debt obligations:
Rep. Larson: “Given what’s happening around the globe…what is your advice to the Congress in terms of acting given the deadlines that Treasury Secretary Geithner has outlined?"
Simon Johnson, Professor of Entrepreneurship at MIT Sloan School of Management (and former chief economist at the IMF): “You cannot play games with something this serious. World financial markets are much more fragile than you’d like to believe…It’s absolutely essential that the United States remain a beacon of safety and clarity to international investors, otherwise there will be consequences for all of us around the world."
Mihir Desai, Professor of Law and Finance at Harvard University: “People may stop receiving their payments which is extremely problematic, but it can also become a broader manifestation of a system that appears broken to the rest of the world and that is where we run into significant problems. I think it’s very important that this particular deadline is not ignored…It is essential that we act now."
WATCH VIDEO: https://youtu.be/IqcgtLIOIN4
Rep. Becerra: “If we take the country to the brink, and say August the 2nd we don’t have any solution or resolution to the debt ceiling issue, what happens in the eyes of the business community?
Simon Johnson, Professor of Entrepreneurship at MIT Sloan School of Management: “We don’t know what happens but we don’t want to find out. Other countries that have tried to play these kinds of games with the financial market usually end up getting burned…Why would you want to take that risk?"
WATCH VIDEO: https://youtu.be/a0030papkk0
