Debt Ceiling Blues

 Click here for Heather Cox Richardson's diary entry for September 21, 2021, where she provides a good explanation of the debt ceiling. 

Only one other country in the world has a debt ceiling: Iceland, which has set the ceiling so astronomically high it will never be reached. Anyway, once again, the debt ceiling is being used by the Republicans as a political tool to whip up political chaos and disagreement:

Tonight, the House of Representatives passed a funding bill that would both keep the government from shutting down and prevent a default on the U.S. debt. The vote was 220 to 211, with all Democrats voting in favor and all Republicans voting against.

If the debt ceiling is not raised, the time will soon come when the U.S. government is forced to default on its debt. No one knows what the result of default would be, because it's never happened -- but economic belief is unanimous that the negative consequences would range from serious to catastrophic.

Treasury Secretary Janet Yellen says it “could trigger a spike in interest rates, a steep drop in stock prices and other financial turmoil. Our current economic recovery would reverse into recession, with billions of dollars of growth and millions of jobs lost.” Financial services firm Moody's Analytics warned that a default would cost up to 6 million jobs, create an unemployment rate of nearly 9% and wipe out $15 trillion in household wealth.

In 2011, Republican refusal to raise the debt ceiling until the last minute resulted in a downgrade of the U.S. federal government creditworthiness from AAA to AA+ -- the first time the U.S. had been given a rating below AAA. Moody's and Standard & Poor explained that although the U.S. had not defaulted, the downgrade was because the Republicans had acted so irresponsibly by leaving the situation to the very last minute that it was clear the government was not to be trusted. 

The debt ceiling charade has always been simply political theater -- a game of chicken where everyone knows the collision will not happen, because the result would be too painful. My fear is that with today's gang of anarchists and Trumpists, particularly in the House, the Republicans might actually be willing to risk economic disaster this time -- maybe a global economic meltdown would give them an opportunity to claim that the Biden administration had caused such a huge amount of damage that the 2020 election would have to be rescinded and Trump could step in to save the world (ha!).

We haven't yet seen how far the Republicans are willing to go to inflict damage on the country for what they perceive to be their political advantage. It doesn't look good.