Washington, DC- Today, U.S. Senator Bob Casey (D-Pa) highlighted a new report showing the consequences of defaulting on the nation’s debt. The report is being released by the Joint Economic Committee (JEC), of which Casey is a member and former Chairman, and details the negative impact that a default could have on the state’s economy and jobs.
“We cannot afford another manufactured debt limit crisis,” said Senator Casey. “Raising the debt limit allows the government to pay for spending Congress has already obligated. The consequences of default will have long-lasting adverse effects on the economy and American families. I urge Congress to end this episode of brinksmanship and come together and pass a clean debt limit as soon as possible.”
As the JEC report highlights, there is broad agreement among economic and business leaders that Congress must raise the debt ceiling and avoid default. Vanguard economists estimated that the last debt ceiling debate resulted in an economic loss of $112 billion over the last two years, and the GAO has estimated the costs to the government alone are $1.3 billion. Another episode of brinkmanship over the debt ceiling would increase economic uncertainty and have a lasting impact on jobs, even if the limit is eventually raised.
The JEC report also shows that the last debt ceiling debate had a dramatic effect on consumer confidence. Confidence fell more than after the collapse of Lehman Brothers in 2008, and did not fully recover until January 2012. During the last debt ceiling crisis, the Dow dropped 2000 points and the US credit rating was downgraded. A drop in the stock market means lost savings for Americans. A harmed credit rating means more expensive credit, which translates to higher costs for housing, education and other critical household expenses. The report and executive summary is attached.