3Center or American Progress | The Debt-Ceiling Crisis
No raising he deb ceiling and orcing a deaul would have exreme consequences.Te global nancial sysem relies on U.S. deb—ha is, reasuries—o be he saesin he world. Tus, he borrowing rae on reasuries is inerwined wih he globaleconomy in myriad ways. A he mos basic level, his borrowing rae is used as a benchmark or ineres raes on common nancial producs in he Unied Saes suchas morgages and auo loans. A spike in ineres raes on reasury bonds because o a deaul would limi businessesand consumers rom borrowing and could raise heir curren borrowing coss. A deaulcould also cause reiremen accouns ha hold a signican amoun o reasuries ocollapse, and i would be more cosly or he governmen o pay down is deb.
Wha’smore, a deaul would orce he Unied Saes o immediaely make drasic cus in crucialgovernmen programs, which could delay or sop paymens o people who receive SocialSecuriy, Medicare, Medicaid, and veerans’ benes.Even he hrea o deaul deeply harms he economy. During he deb-ceiling debae in2011, consumer condence anked, he Dow Jones Indusrial Average ell 2,000 poins,and he Unied Saes los is perec credi raing or he rs ime in hisory.
Accordingo Larry Summers, ormer reasury secreary and Disinguished Senior Fellow a heCener or American Progress, an acual deaul would lead o “a cascade ha makesLehman Brohers look like a very small even.”
Former Presiden Ronald Reagan said i bes when discussing he impac o breachinghe deb ceiling: “Te ull consequence o a deaul—or even he serious prospec o deaul—by he Unied Saes are impossible o predic and awesome o conemplae.”
How did we get to this point?
In 2011, House Republicans used voing agains he deb ceiling as a bargaining chipo reduce governmen spending, which led o he damaging sequeser cus we haveoday. oday, one acion o he Republican Pary in he House o Represenaivesis jeopardizing he credi o he Unied Saes unless heir long lis o parisan policy demands is me. Tis lis includes delaying he Aordable Care Ac, also knownas Obamacare; guting environmenal regulaions, and overhauling he ax code.
Presiden Barack Obama has made i clear ha he will no negoiae on jeopardizinghe ull aih and credi o he Unied Saes.