Washington, DC — The extreme MAGA House Majority is threatening to manufacture a catastrophic default crisis and economic collapse. To hold the economy hostage, the House passed a long list of hugely unpopular and extreme ransom demands that promise pain for millions of average Americans including veterans, seniors, students, children, workers, and the food insecure. They voted to ship 100,000 high paying manufacturing jobs overseas while going out of their way to protect wealthy tax cheats. The MAGA Majority’s proposed cuts are untenable, unworkable, and unserious, especially as they leave in place costly tax breaks for billionaires and big corporations. With the nation now projected to run out of money as early as June 1st, Accountable.US’ Cost Of MAGA Default’ project continues to underscore the catastrophic consequences of a MAGA default that grows closer by the day.
The MAGA House Majority passed a radical default bill filled to the brim with extreme cuts that put the economic safety of veterans, seniors, students, and their families at risk. The MAGA proposal is an unserious response to a very real risk. Failure to avoid a default threatens to push our fragile economy into a full-blown tailspin. It’s not just reckless, it’s downright dangerous.”
Liz Zelnick, spokesperson for Accountable.US.
Today In Focus: Failure to Avoid Default Could Cause a Recession, Leading To Businesses Holding Back On Investing, Hiring, And Causing Banks To Be “Circumspect About Extending Credit” To Consumers.
- March 2023: Chief Economist Of Moody’s Analytics, Mark Zandi, Testified Before The U.S. Senate Committee On Banking, Housing, And Urban Affairs Subcommittee On Economic Policy About The Consequences Of The U.S. Defaulting On Its Debt. [U.S. Senate Committee on Banking, Housing, and Urban Affairs, 03/07/23]
- Zandi Said, “If Lawmakers Are Unable To Resolve The Debt Limit In Time And The Treasury Begins Paying Its Bills Late And Defaults, Financial Markets Would Be Roiled.” “If lawmakers are unable to resolve the debt limit in time and the Treasury begins paying its bills late and defaults, financial markets would be roiled.” [U.S. Senate Committee on Banking, Housing, and Urban Affairs, 03/07/23]
- If The U.S. Ultimately Defaulted On Its Debt, Even Briefly, Zandi Said “It Would Be Too Late For The Already Fragile Economy,” Causing A Recession. “It is unimaginable that lawmakers would allow things to get to this point, but as the TARP experience highlights, they have done the unimaginable before. Yet, if that experience is a guide, lawmakers would reverse course within a few days and resolve the debt limit impasse to allow the Treasury to resume issuing debt again and pay its bills. Much damage will have already been done, and although markets would right themselves, it would be too late for the already fragile economy, and a recession would ensue.” [U.S. Senate Committee on Banking, Housing, and Urban Affairs, 03/07/23]
- Ultimately, This Would Impact Confidence In Consumers, Businesses And Investors, Causing Companies To “Pullback On Investment And Hiring,” And Banks To Be “Circumspect About Extending Credit To Households And Businesses.” “Adding to the economic turmoil would be the loss of consumer, business, and investor confidence. Political brinkmanship over the operations of the federal government has been frightening for Americans to watch. In both the 2011 and 2013 debt limit episodes, households were closely attuned to the political hardball being played in Washington and consumer sentiment slumped. The brinkmanship is also unnerving for businesses, who will pullback on investment and hiring, and financial institutions, who will quickly turn more circumspect about extending credit to households and businesses.” [U.S. Senate Committee on Banking, Housing, and Urban Affairs, 03/07/23]
- Zandi Also Warned That Equity Rates, Treasury Yields, Mortgage Rates, And Other Consumer Borrowing Rates Would Spike If The Debt Ceiling Is Breached, Shutting Down “Short-Term Funding Markets,” Resulting In Rates “Not Fall[ing] Back To Where They Were Previously.”
- Zandi Said Interest Rates Would Spike And Plunge Equity Prices, Likely Shutting Down “Short-Term Funding Markets, Which Are Essential To The Flow Of Credit That Helps Finance The Economy’s Day-To-Day Activities.” “If lawmakers are unable to resolve the debt limit in time and the Treasury begins paying its bills late and defaults, financial markets would be roiled. A TARP moment seems likely, hearkening back to that dark day in autumn 2008 when Congress initially failed to pass the Troubled Asset Relief Program bailout of the banking system, and the stock market and other financial markets cratered. A similar crisis, characterized by spiking interest rates and plunging equity prices, would be ignited. Short-term funding markets, which are essential to the flow of credit that helps finance the economy’s day-to-day activities, likely would shut down as well.” [U.S. Senate Committee on Banking, Housing, and Urban Affairs, 03/07/23]
- Zandi Also said Moody’s Predicted A Debt Ceiling Breach Would Spike “Treasury Yields, Mortgage Rates, And Other Consumer And Borrowing Rates,” And Even If The Breach Is Resolved, “Rates Would Not Fall Back To Where They Were Previously.” “Based on simulations of the Moody’s Analytics model of the U.S. and global economies, the economic downturn that would ensue would be comparable to that suffered during the global financial crisis Treasury yields, mortgage rates, and other consumer and corporate borrowing rates would spike, at least until the debt limit is resolved and Treasury payments resume. Even then, rates would not fall back to where they were previously. And the economy’s long-term growth prospects will be materially diminished.” [U.S. Senate Committee on Banking, Housing, and Urban Affairs, 03/07/23]
BACKGROUND: Accountable.US’ ‘Cost of MAGA Default’ project puts a daily spotlight on specific harms the MAGA Majority’s default plan and brinkmanship will bring for Main Street and Wall Street alike – from tanking markets, frozen credit, lost jobs, disruptions to critical benefits like Social Security, and soaring interest rates on everything from car loans to mortgages. While the MAGA Majority claims they are holding the economy hostage over supposed debt ‘concerns,’ they insist on harmful cuts – crafted by the far-right House Freedom Caucus – aimed at average Americans while protecting and even expanding debt ballooning tax breaks for billionaires and big corporations that profiteer and ship U.S. jobs overseas. The clock is ticking. The MAGA majority should stop playing dangerous political games with American lives and the economy and responsibly pass a clean bill that allows the nation to pay its bills. The sooner they do, the less damage will be inflicted on Americans of all walks of life.