NEW REPORT: REPUBLICANS’ REFUSAL TO RAISE DEBT LIMIT WOULD COST 6 MILLION JOBS 

New Moody’s Report Makes Clear That Republican Refusal to Raise or Suspend the Debt Limit Would Cause an Economic Crisis

Chief Economist Mark Zandi Says Failing to Raise the Debt Ceiling Would Cost 6 Million Jobs & Nearly Double Unemployment

Failing to raise the debt limit would cost 6 million jobs, send unemployment skyrocketing to 9 percent, and wipe out $15 trillion in household wealth, according to a new report from Moody’s Analytics chief economist Mark Zandi.

Zandi predicts that the “cataclysmic” scenario spurred by a failure to suspend the debt limit would be “comparable to that suffered during the financial crisis” of 2008. The report also notes that the economic damage caused by heightened political uncertainty from debt limit obstruction in 2011 and 2013 cost 1.2 million jobs and $180 billion in GDP.

Yet Senate Minority Leader Mitch McConnell continues to oppose raising the debt ceiling, reiterating today that no Republicans will support doing so, despite admitting that the debt ceiling “should be” raised. Clearly, Republicans’ hypocritical stance is nothing but empty posturing that puts at risk the economic welfare of middle-class Americans and the entire economy.

KEY POINTS FROM THE REPORT:

  • If lawmakers are unable to increase or suspend the debt limit before the Treasury fails to make a payment, the resulting chaos in global financial markets will be difficult to bear. The U.S. and global economies, which still have a long way to go to recover from the recession caused by the pandemic, will descend back into recession.

  • This economic scenario is cataclysmic. Based on simulations of the Moody’s Analytics model of the U.S. economy, the downturn would be comparable to that suffered during the financial crisis. That means real GDP would decline almost 4% peak to trough, nearly 6 million jobs would be lost, and the unemployment rate would surge back to close to 9%.

  • Treasury yields, mortgage rates, and other consumer and corporate borrowing rates spike, at least until the debt limit is resolved and Treasury payments resume. Even then, rates never fall back to where they were previously. Since U.S. Treasury securities no longer would be risk free, future generations of Americans would pay a steep economic price.

Read the full report here.

Republicans in Congress have consistently voted to raise or suspend the debt ceiling, even after costly tax cuts for the wealthy. 

  • Between 2017 and 2019, a majority of GOP senators supported raising or suspending the debt ceiling three times, including after the passage of the Tax Cuts and Jobs Act which the CBO estimated would increase the deficit by $1.9 trillion.

  • Between 2001 and 2008, a majority of GOP senators supported raising the debt ceiling seven times, including after tax cuts that added $5.6 trillion to the deficit.

Failing to raise the debt ceiling would be catastrophic for American families. 

  • Seniors could lose Social Security checks, putting almost 22 million Americans at risk of falling into poverty.

  • Families could lose Child Tax Credit payments.

  • Military families could suffer as the Treasury becomes unable to pay military salaries.

  • Government employees and contractors could see their pay halt, and loans to small businesses could stop.

  • Household payments on mortgages, auto loans, and credit cards could rise.

  • American corporations and small businesses could see credit markets deteriorate.

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