Newsletter: A Note on the Debt Ceiling
I’m sure you are all watching and reading the news these days wondering how Washington could let America come so dangerously close to defaulting on its debts.
I want to share some thoughts on the implications of what’s going on and where we go from here.
How Did We Get Here?
The debt ceiling, also known as the debt limit, is the maximum amount of money that the U.S. Treasury can borrow. Normally, Congress would pass legislation to adjust the debt limit as needed to ensure that we can pay our bills. It has done this 78 times–including three times under President Trump alone!
Regardless of whether you think our government is spending too much or too little, raising the debt ceiling is addressing debts we’ve already incurred—like paying your mortgage or your credit card bill every month.
But driven by extremist Republicans like Marjorie Taylor Greene, Speaker McCarthy is demanding draconian cuts to veterans, education, and just about everything else in exchange for raising the ceiling. His cuts are so draconian, they're not even realistic. But the extremists don’t care about facts; they care about scoring political points. And let’s not forget: McCarthy needed Marjorie Taylor Greene’s vote to become Speaker.
Let’s also not forget: Democrats like myself disagreed with Trump’s tax cuts for the wealthiest corporations, but we still raised the debt ceiling to pay for them because it’s the right thing to do for our country to avoid default.
Given House Republicans’ extremist position, the President, Speaker, and Congressional leaders from both parties are now in talks as the estimated default date of early June quickly approaches.
When Is the Right Time to Debate Spending?
The debt ceiling itself is not a tool to reduce spending. We should be having serious debates about spending during the annual appropriations process, when Congress allocates money for the government’s budget–and when the threat of defaulting is not hanging over our heads.
It’s not that different than what we do with our own families: We should think carefully, even have a serious debate, before making any big purchase. But once we’ve bought it, we need to pay the bill.
And if we don’t pay the bill? We wouldn’t expect any bank to trust us with a mortgage or car loan again. That’s why the very faith and credit of our nation is on the line.
Why is this so Dangerous?
Let’s be clear: America should never negotiate on its full faith and credit. The Speaker (and the MAGA Republicans he is beholden to) are setting a dangerous precedent and risking America’s financial health for the sake of their ideological fixations.
Even coming close to a default hurts our economy. In 2011, when the federal government approached a default, stock prices plunged, market volatility spiked, corporate investments declined, and mortgage rates increased. On the whole, both consumer confidence and small-business optimism dropped. All this, before a default had even occurred.
While there is no historical precedent for the U.S. breaching its debt ceiling without Congress taking action, there is broad consensus by economists that a default would cause a lot of damage to the economy and erase the gains made in recent years. Over 7 million Americans could be thrown out of work. In our district alone, defaulting could kill about 8,400 jobs.
I support the President’s position to stand firm on defending America’s financial credibility. This is a fluid situation, and the status of the negotiations could change or stall at any moment.
I recently joined every other House Democrat in signing a “discharge petition,” which would force a vote to raise the debt ceiling cleanly. In order to succeed, though, this action would need at least five signatures from Republicans. It does not yet appear that there are five Republicans who are willing to cross party lines.
This episode will likely require some kind of compromise, which will be necessary to avoid this catastrophe. Right now there is a set of concessions on the table including clawing back money that was dedicated for covid relief (but which was never actually spent), capping future budgets, and imposing work requirements to receive certain federal benefits.
Every American should understand that negotiating things like work requirements isn’t about lessening the debt; it’s about using America’s full faith and credit as an ideological gambling chip. Work requirements, for example, would result in about $1 billion saved. In comparison, Republicans could be emboldened to extend the Trump tax cuts next, which would add another $3.5 trillion to the debt. In other words, we could save $1 with work requirements for every $3500 we could save on tax cuts for the wealthy. Which makes more sense?
At the end of the day, extremists are setting a dangerous precedent that we should play politics with America’s full faith and credit. That weakens our nation. It is the wrong thing to do for our country.
As always, you can reach out to me and my office with any questions you have ,or if you're in need of assistance.
Rep. Seth Moulton
Member of Congress
Massachusetts' District Six