This is not about what would happen were the United States to default on its debt. It’s about what occurred in 2011 when one party threatened to let that happen.
A Democrat, Barack Obama, was president, and for crazy partisan reasons, the Republican leadership deemed it a smart move to play games with the full faith and credit of the United States. Wouldn’t crashing the economy sully the record of a Democratic administration and reward us at the polls? That’s what they seemed to think.
Well, the standoff over the debt ceiling so spooked the markets that the S&P 500 index fell 7% in one day, erasing $1 trillion dollars from Americans’ net worth. Consumer confidence crashed to a low point not seen since the dregs of the financial meltdown a few years before.
As a bonus kick in the nation’s rear, the specter of a major political party putting into question America’s willingness to pay back money owed prompted Standard & Poor’s to take away America’s triple-A credit rating. We still haven’t gotten it back. Casting doubt on our readiness to repay investors has since cost the U.S. Treasury an estimated $19 billion in higher interest costs.
By the way, nine countries have triple-A ratings. They are Australia, Denmark, Germany, Luxembourg, the Netherlands, Norway, Singapore, Sweden and Switzerland.
Republicans are at it again. As Senate Minority Leader Mitch McConnell put it dishonestly, irresponsibly and treacherously, “There’s no chance Republicans will help lift Democrats’ credit limit.” I’ll spare you his blah-blah-blah about socialism or that raising the debt limit would “help China.” Be assured that China is delighted at the disgraceful spectacle of national dysfunction.
About the money owed: We raise the debt limit to pay for spending that has already been authorized, not future spending. And much of the spending and debt Republicans are now denouncing was their own, supercharged under the guidance of former President Donald “I’ve always loved debt” Trump.
During the Trump administration, the ratio of U.S. debt to the size of the economy surpassed 100% for the first time since World War II. And no, Trump’s tax cuts didn’t come close to paying for themselves but in fact bloated further deficits. Republican spending, meanwhile, went off the charts. And in those four years, Democrats voted to raise the debt ceiling three times.
But what about the COVID-19 pandemic? Wasn’t Trump simply dealt a bad economic card? He was, although his clowning around about the seriousness of the crisis and failure to forcefully curb it made the economic damage worse than it had to be. And let us recall that Obama was also handed a bad card: He inherited an economy in smoking ruins, courtesy of his Republican predecessor.
It’s crazy that Congress even has to vote on this, but when it comes time to raise the debt limit, lawmakers simply have to do it. The debt ceiling has been raised 98 times since World War II. It was done under Republican Ronald Reagan 18 times.
This might reflect the right wing’s determination to subject America to chaos all the time. But Republicans should drop the notion that playing chicken with the country’s creditworthiness is a political winner.
Americans were not amused by the stress and higher borrowing costs perpetrated by the insanity of 10 years ago. And they didn’t blame Democrats for it. The next year, Obama was elected for a second term, and Democrats gained two seats in the Senate and eight seats in the House.
Republicans will not win hearts by insisting that they don’t have to help America repay its debts—especially since they racked up so much of them.