The clock is ticking toward an extremely dangerous debt ceiling crisis that could devastate the world economy as early as June. The first wave of a potential debt ceiling crash in financial markets would happen if bond market rating agencies downgrade the full faith and credit of the United States before a formal default, if they lose confidence in the president and Congress to address the crisis.
Because of the severity of the danger, the Biden administration and Congress should carefully and objectively study the magnitude of financial peril.
The issue is widely understood by leading financial experts who have served both parties for a long time.
And let me emphasize that many Washington insiders will casually say, “of course we understand the danger,” but with all due respect there are important people I have spoken to in both parties whom I know and respect who in fact do not fully understand.
Three months have been wasted, by both parties and at both ends of Pennsylvania Avenue, with low-grade political spin and unproductive maneuvering.
If the U.S. goes into default, the stock market will collapse, the economy will fall into a deep recession, Social Security payments will cease, the jobless rate will rise, interest rates will soar and other urgently needed payments will not be made. What about this do politicians in both parties not understand?
Who would angry and hurting voters not blame?
Specifically, the latest “plan” put forward by House Speaker Kevin McCarthy (R-Calif.) was a “greatest hits” album of bad and regressive ideas that have no chance of forming any basis for agreement.
And President Biden’s ad nauseam repetition of “I will never negotiate!” has become a broken clock stuck on the wrong time.
They all may whisper about how they will negotiate at some time. But history teaches that disastrous wars and stock market crashes often occur because politicians were not as smart as they convinced themselves they were, and events overtook them.
The problem in official Washington today, after many years of decrepit partisanship, is that far too many politicians have forgotten how to do bipartisanship at the critical moments. President Biden has been able to work with some Republicans, all of whom deserve credit for this, during his first two years.
Bipartisanship is the only way to avoid the financial catastrophe of a debt disaster and default. There are two ways bipartisanship can solve the debt ceiling crisis. There can be an add-on to the debt ceiling vehicle itself. Or the debt ceiling can be clean, but a bill can be passed, separately and simultaneously, with some mutually agreed upon deficit reduction and a process to cut the budget further later in the year.
Republicans could get some return of unspent COVID-19 money or limited spending cuts. Democrats could get limited tax increases from high-income earners and lower prescription drug prices, which would help consumers and lower spending.
Both parties would get some things they favor; both parties would accept things they would prefer not to accept. That is what bipartisanship means.
But the discussions must begin now. The consequences of default are too dire to wait another day.
Budowsky was an aide to former Sen. Lloyd Bentsen (D-Texas) and former Rep. Bill Alexander (D-Ark.), who was chief deputy majority whip of the House of Representatives.