This post is by National Memo editor-in-chief Joe Conason.
Failure to raise the debt ceiling before August 2 threatens worsened unemployment, a renewed recession and potential economic “chaos,” warn bipartisan experts who are now speaking out more loudly against Republican brinksmanship in Washington budget negotiations.
A new study released by the Bipartisan Policy Center – and endorsed by a coalition of former federal budget officials and legislators from both parties – estimates that as many as 800,000 jobs would be curtailed immediately if the United States government becomes unable to meet its financial obligations. Those federal employees would be thrown out of work, along with workers at companies with federal contracts, because the Treasury would default on at least half of its normal payments by mid-August. Salary checks would simply stop arriving from the Departments of Veterans Affairs, Education, and Housing and Urban Development; unemployment insurance and IRS refund checks would stop, too.
“The reality would be chaotic,” says Jay Powell, a former Treasury official under President George H.W. Bush who wrote the study, which was first obtained by Business Week.
Meanwhile Mark Zandi, the chief economist of Moody’s Analytics and former economic adviser to Republican John McCain’s 2008 presidential campaign, issued an equally stern caution at a breakfast hosted by the Christian Science Monitor. Economic growth in the final months of 2011 could rise to four percent, doubling the current anemic rate – but not if Congressional Republicans refuse to increase the debt ceiling. Should the deadline pass without action, said Zandi, the faltering recovery will drop dead. Indeed, Zandi seemed to rebuke Republicans not only for playing politics with the national debt but for seeking to slash spending when unemployment remains high and the recovery is still so feeble.
“If we get to August 2 and there is no debt ceiling limit, and there have to be significant spending cuts – even if Congress and the administration reverse themselves days later — I think the damage will have been serious, and we probably would be thrown into a recession,” he told reporters at the Monitor breakfast.
Do politicians like House Majority Leader Eric Cantor and newly minted presidential hopeful Michele Bachmann, who has mocked similar warnings from the White House as “scare tactics,” really misunderstand economic reality so badly – or are they actually seeking to blow the recovery for partisan ends? Republicans who follow the advice of Bachmann and Cantor ought to be careful. Polls show that most Americans would blame their party for an unresolved debt crisis –and the economic disaster that appears certain to follow.
