The prospect of negotiating a debt ceiling increase with Republicans is prompting warnings of economic ruin and chaos from President Biden’s White House and Democratic leaders in the House and Senate.
Democrats for days now have been fixated only on what might happen if there is no agreement to raise the debt ceiling by the summer, and not the far more likely possibility of agreeing to spending cuts at the federal level over the next few months in return for an increase in the government’s borrowing limit.
The Democrats’ dire predictions started with Treasury Secretary Janet Yellen, who told House Republicans last week that a debt ceiling hike would be needed by June. She urged lawmakers to quickly raise the ceiling in order to allow the government to keep paying its obligations and “protect the full faith and credit of the United States.”
Over the weekend, Yellen speculated at length about what would happen if Congress failed to raise the debt ceiling by June, and predicted “irreparable harm to the U.S. economy, the livelihoods of all Americans and global financial stability.”
“If that happened, our borrowing costs would increase and every American would see that their borrowing costs would increase as well,” Yellen said. “On top of that, a failure to make payments that are due, whether it’s the bondholders or to Social Security recipients or to our military, would undoubtedly cause a recession in the U.S. economy and could cause a global financial crisis.”
The White House has similarly spent the last week warning of apocalyptic economic scenarios that would follow a decision not to raise the debt ceiling by June. White House press secretary Karine Jean-Pierre accused Republicans of “threatening to kill millions of jobs and 401(k) plans by trying to hold the debt limit hostage.”
Jean-Pierre warned repeatedly that a debt ceiling hike was not open to negotiation. “There will not be any negotiations over the debt ceiling,” she said, adding that it’s an “obligation” of Congress to raise the ceiling without condition and “avoid economic chaos.”
President Biden himself called Republicans “fiscally demented” last week for seeking cuts to the federal government’s $6.3 trillion annual budget, which grew by more than 50% when the COVID pandemic hit. Today, the federal government is still spending nearly $2 trillion more than what it spent just before the COVID pandemic that Biden has declared to be “over.”
On the Senate floor Monday, Majority Leader Chuck Schumer, D-N.Y., mirrored those talking points by talking about the possibility of default months down the road instead of how the next few months might be used to hammer out an agreement.
“Listen to what could happen if we default,” he said on the Senate floor. “Interest rates will go up on mortgages, on car loans, on credit cards. Pensions, the money people had put aside, will lose billions. So will IRAs and 401(k)s in all likelihood. Home values will decline because when mortgage interest rates go up, people are willing to pay less for homes.”
“Brinksmanship, hostage-taking, default on the debt should be off the table,” Schumer added. “House Republicans’ approach to the debt ceiling, destabilizing, and the only thing it accomplishes is making a bipartisan solution less likely.”
The Democrats’ dire warnings have come even though most Republicans have said they have no interest in a default and want to use the need for a debt ceiling increase to pare back what they say has been excessive federal spending over the last few years.
House Speaker Kevin McCarthy, R-Calif., has called for talks with the White House as soon as possible to avoid a default and get an agreement in place early in the process.
Republican Study Committee Chairman Kevin Hern, R-Okla., last week criticized national press coverage of the debt ceiling, which he said has been filled with “irrational shock and horror.” He said Republicans must ignore Democrats’ effort to label the GOP push for spending reductions as “reckless and irresponsible,” and said the more terrifying prospect for America is continuing to pile on “unsustainable debt.”
Rep. Chip Roy, R-Texas, also dismissed Democratic fearmongering in an interview with Reuters last week.
“That’s what they say every time. It’s like clockwork,” Roy said in an interview. “We’re already barreling toward a recession. The question is what it’s going to look like – unless the combination of monetary policy and fiscal policy saves us from our stupidity of having spent so much money.”
On Tuesday, the Heritage Foundation told Fox News Digital in an exclusive statement that pressure created by the debt ceiling is an “indispensable tool” to bargain for cuts, and said it backs the widely supported GOP plan to cap spending at fiscal year 2022 levels as a start. That year still had near-record spending levels, and Heritage suggested taking aggressive steps to curb unnecessary spending.
“These policies could include regulatory reforms, rescissions of unspent COVID funds, reforms to the civil service, permitting reform, and others,” Heritage said. “During this process, conservatives should reject reckless proposals to eliminate or suspend the debt limit, and ensure any increase is a transparent dollar amount.”
Last week, Senate Minority Leader Mitch McConnell, R-Ky., said he doesn’t believe a debt default is in the cards as Democrats have been predicting.
“In the end, I think the important thing to remember is that America must never default on its debt,” he said. “It never has and it never will. But we will end up in some kind of negotiation with the administration over what are the circumstances or conditions under which the debt ceiling be raised… No, I would not be concerned with a financial crisis.”
Fox News’ Kelly Laco contributed to this report.