Today’s hearing appears to have been originally designed to give the veneer of credibility to the notion that it might be appropriate, thinkable, or manageable to default on our debt.
It is none of these.
The debt ceiling is about paying the bills of the United States of America, spending that this institution authorized. Manipulating it - today, next week, or in three months - damages our economy and our credibility.
In the summer of 2011, Republicans in Congress pushed our nation toward default. There were clear consequences. Today, they are prolonging another debt ceiling showdown instead of a long-term extension. This continues and increases the economic uncertainty. Our nation’s economic wounds from 18 months ago are simply too fresh to ignore.
* Aug. 2011 was the single worst month for job creation in the last three years.
* The Dow Jones Industrial Average plunged 2,000 points in July and August of 2011, including one of its worst single day drops in history - tumbling 635 points on Aug. 8.
* The Treasury was forced to spend $1.3 billion more in interest payments, according to a Government Accountability Office estimate. The Bipartisan Policy Center estimates the higher costs will be almost $19 billion over the next decade.
* And of course, who could forget that the U.S. credit rating was downgraded for the first time in our history.
One Standard & Poor’s senior director said shortly after the credit agency downgraded the U.S. credit rating that the stability and effectiveness of American political institutions were undermined by the fact that “people in the political arena were even talking about a potential default."
The Washington Post unequivocally stated in a story this week that “in 2011, the debt ceiling dispute traumatized the economy."
Chris G. Christopher Jr., a senior principal economist with IHS Global Insight, was one of the many economists who have warned against a repeat. He wrote in a report last week: “If the political bickering over the debt ceiling issue reaches a fever pitch as it did in the summer of 2011, then consumer confidence will nose-dive further into recession territory."
We are hearing today that instead of quickly enacting a clean increase to the debt ceiling, there may be some other options. Some of the witnesses seem to suggest that it might be possible to instruct Treasury to pay bondholders while delaying payments to others.
Whose bills should be delayed or cut? The Social Security checks of 56 million seniors and people with disabilities? The salaries of more than 2 million American military personnel, many of whom are currently in harm’s way?
The idea is so troubling that it drew a strong rebuke from the Washington Post fact checker last week. He said: “By available evidence, it appears all but impossible for the Treasury Department to pick and choose among payments."
It is reported that Chairman Camp, too, cautioned his colleagues last week that such an approach is unworkable.
I urge that it embellishes history to imply that threatening to default has historically been used as leverage for deficit reduction, such as with Gramm-Rudman. In the House, in both cases, the debt ceiling bill was deemed passed and the Senate then used it as a vehicle - not as a threat - for the deficit reduction legislation.
Over the past two years we have achieved $2.5 trillion in deficit reduction and set an important precedent for future further balanced deficit reduction that includes both spending cuts and new revenue.
We should proceed with this effort, focusing further on economic growth and jobs, not damaging this effort by attempting to use the debt ceiling for political leverage.
