Causing a crisis: The solution to inflation is not a depression
Over the last few weeks, the Republican plan for reducing inflation has come into view.
They’ve long said they wanted to “reduce spending,” but without much detail.
After hearing from Minority Leader Kevin McCarthy — who wants to be the next Speaker — now we’ve got the full picture.
Here’s the plan:
If they take the majority in the House, the GOP will refuse to lift the debt ceiling — which we will likely reach early next year — unless Democrats agree to cut Social Security and Medicare.
In other words, they’re going to take the economy hostage, again.
Republicans voted to increase the debt ceiling three times under Trump — but under Obama, they used debt ceiling votes to take the economy hostage over and over, repeatedly threatening financial catastrophe to the point where our nation’s bond rating was downgraded for the first time in history.
What they’ve now promised is a return to that style of “negotiation” — only this time, they may actually pull the trigger and break the ceiling.
If that happens, our nation would default on our debt. It would set off a cascading crisis with vast and unpredictable outcomes. An immediate and severe economic downturn would be the beginning.
From the U.S. Treasury:
In the event that a debt limit impasse were to lead to a default, it could have a catastrophic effect on not just financial markets but also on job creation, consumer spending and economic growth — with many private-sector analysts believing that it would lead to events of the magnitude of late 2008 or worse, and the result then was a recession more severe than any seen since the Great Depression. Considering the experience of countries around that world that have defaulted on their debt, not only might the economic consequences of default be profound, those consequences, including high interest rates, reduced investment, higher debt payments, and slow economic growth, could last for more than a generation.
So look, if you think current spending levels are unsustainable, ok, I hear you — but if your answer is to trigger a depression, then you’ve left the realm of responsible governance.
No matter what your politics are, we should all be able to agree that breaching the debt ceiling — with the economic fallout that comes with it — is not good medicine. It’s a big gulp of fiscal poison.
Inflation is harmful and deserves a strong policy response. But playing games with the debt ceiling is something else completely. It’s wildly irresponsible and has literally nothing to do with inflation — it’s just threatening disaster to accomplish deeply unpopular policy goals that Republicans could never openly campaign on or achieve through a regular legislative process.
And to my Republican friends, I say this with respect and sincerity:
You cannot possibly prefer defaulting on our debt to our current fiscal course, no matter how concerned you are about spending.
There is simply no world in which default is preferable to any other outcome. It would make every fiscal problem we currently face much worse as we’d see tax revenue plummet, unemployment soar, and global instability spike.
And yet, GOP leadership is sending very clear signals that it’s willing to allow a default. Given how close they’ve come before, we have to take those threats seriously — as in, serious enough to consider it a major voting issue, no matter your politics.
- State Sen. Jeff Jackson