Crisis as Bad as 2008: Democrats Spotlight Consequences of a US Default

House Minority Leader Hakeem Jeffries (D-N.Y.) answers questions during a press conference at the U.S. Capitol on Jan. 12, 2023 in Washington. (Win McNamee/Getty Images)

Democrats from the Joint Economic Committee presented a report about the possible consequences of Republicans not raising the debt ceiling.

The group was led by Senate Majority Leader Chuck Schumer (D-N.Y.) and House Minority Leader Hakeem Jeffries (D-N.Y.), who warned during a March 23 press conference that the Republican Party’s stance on the debt limit could have severe consequences for American families and the wider economy.

The possible fallout cited by lawmakers included but was not limited to the loss of retirement savings, seniors’ interruption of SS benefits, a global financial crisis possibly as bad as 2008, doubling unemployment, a steep decline in GDP, crashing markets, and worldwide recession.

The report created by Democrats in the House and Senate argues that Republicans are creating a default crisis that will damage confidence in the United States’ commitment to paying its bills and increase costs for families, from mortgages and car loans to student loans and small business loans.

“House Republican colleagues are gambling with American families’ pocketbooks as part of a political ploy,” Schumer said during the press briefing. “Just yesterday, the House Republican budget committee doubled down on its threat to play political games with the first-ever default. That’s what the chairman did.”

The report highlights the importance of lifting the debt limit to ensure the government can meet its commitments to programs like Social Security, Medicare, Medicaid, veterans’ benefits, and the military. Failure to lift the debt limit could put these programs at risk of disruption, jeopardizing the stability of the U.S. and global financial markets, according to congressional Democrats.

Americans “could lose $20,000 in retirement savings. Mortgages, car loans, credit card will all go up,” the Senate majority leader continued. “Homeowners would pay $55,000 more for a home.”

The report also points out that even the threat of breaching the debt ceiling can have serious economic consequences. The uncertainty it creates can push up interest rates and undermine confidence worldwide in the U.S. economy. The report states that debt-limit brinkmanship caused interest rates to rise on mortgages and credit cards in 2011, and warns that the same could happen again.

“It’s time for the extreme MAGA Republicans ... to come together with everyone else ... to do what’s necessary to raise the debt ceiling,” Jeffries said. “And then let’s sit down and have a conversation about the future and investments that need to be made on behalf of the American people.”

The report concludes that lifting the debt limit is the only option to avoid economic chaos and urges Congress to act to cover existing obligations before the steep costs to the American people worsen. It also states that the Inflation Reduction Act, passed by Democrats last year, could help reduce the deficit by almost $240 billion, but not a single Republican voted in support of the bill.

The conflict between Republicans and Democrats intensified following a March 10 letter from the House Freedom Caucus (HFC) saying they would “consider voting to raise the debt ceiling” if certain contingencies were enacted through legislation.

The HFC advocated for strategies that would restrict future expenditures and cut existing expenditures. In addition, it would recover unused COVID-19 funds, the IRS growth fund, and a number of other reductions. According to the HFC, this would result in long-term savings of $3 trillion.

Representatives for the Republicans on the House Budget Committee did not immediately respond to The Epoch Times’s request for comment.