The highly regarded Moody’s Analytics determined that the Republican debt ceiling plan would send the economy meaningfully closer to a recession.
If you’re keeping track, being pro-recession is an odd position for a party that campaigned against inflation and a recession, although to be fair Republicans never provided a plan to address either.
The Moody’s analysis found (my emphasis):
“The Limit, Save, Grow Act of 2023 would cut into near-term economic growth if passed into law. Compared
with a scenario that includes a clean debt limit increase and no other significant changes to fiscal policy
under current law, real GDp in the year ending in the fourth quarter of 2024 would be 0.65 percentage
point lower. That is, in the Clean Debt Limit scenario, real GDp is expected to grow 2.25% in
the year compared with 1.6% if Speaker McCarthy’s legislation becomes law.
“While the economy skirts recession in both scenarios, recession risks are uncomfortably high, with a consensus of economists and many investors and business executives expecting a downturn beginning late this year or early next. The timing of the government spending cuts in the Limit, Save, Grow Act is thus especially inopportune as it would meaningfully increase the likelihood of such a downturn.
“Under the legislation, GDP growth is so weak that employment declines in the first three quarters of 2024, and the unemployment rate rises by more than a percentage point to 4.6% by the fourth quarter of 2024. Compared with the Clean Debt Limit scenario, by year-end 2024, employment is 780,000 jobs lower, and the unemployment rate is 0.36 percentage point higher.”
Job loss and recession, what’s not to love about the Republican plan, that is, if you’re a Republican and the only thing you care about is obstructing progress and harming people for political benefit.
Moody’s noted that the “x-date” – the date at which the U.S. government runs out of money – is coming sooner than expected due to lower tax receipts so far. “… it appears that the X-date may come as soon as early June. If not, and Treasury is able to squeak by with enough cash, then the X-date looks more likely to be in late July.”
Meanwhile, Speaker McCarthy is offering to toss the economy into a recession as his big “negotiation” — that is to say, what he is asking for as he holds the country hostage and refuses to the do the job both parties have done at least 90 times in the 20th century regarding raising the debt ceiling limit. For example, it was raised 18 times under conservative President Ronald Reagan.
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Raising the debt ceiling is like paying your credit card: You have already made the purchases, now it’s time to pay. But instead, Republicans like to use the payment contract as an opportunity to strong arm their debtors. Essentially, their argument is, ‘We won’t pay what we agreed to pay. How about you change everything you got elected to do and then we will pay some of our bill, but only for the next year.”
Again, the debt ceiling was raised 18 times under Reagan. It’s not something with which those who “identify” as “fiscal conservatives” have a problem. Raising the debt ceiling is something that only became a problem when the first Black president was elected and Republicans made a conscious effort to become the party of obstruction.
It might be fair to say that Republicans care about the deficit and that’s a good thing, except that a new study found that that the Trump and Bush tax cuts are “primarily” responsible for the increasing debt ratio. Without the Bush and Trump tax cuts, “debt as a percentage of the economy would be declining permanently.”
Republicans were told all of this before they passed the huge deficit cratering Trump tax cuts that benefited mostly the wealthy. They did it anyway. Now they want to take from the poor and from children’s food to make up for those tax cuts, but not even in a normal budget negotiation.
It’s also worth noting that Republican offer has $130 billion in not individually listed spending cuts for the next year alone. No one but them know what is in those not enumerated items. So that’s fun.
Moody’s suggests that nondefense outlays under McCarthy’s plan could fall to the lowest level since the 1960s, “If nondefense discretionary outlays were to bear the full brunt of the proposed budget cuts, they would fall to 2% of GDp by fiscal 2033, the lowest since at least the early 1960s.”
It also cuts SNAP, adds work requirements on Medicaid recipients who do not have children, makes significant changes to President Biden’s energy policy initiatives and would prevent Biden’s executive orders on student loans.
What would Democrats get for giving up President Biden’s accomplishments, climate actions, and throwing the vulnerable to the wolves? They get to do this again next year, because the Republican “offer” is only good for a year.
Next year is an election year, so the Democratic party will have a lot at stake and be in a worse position. But none of this should be happening, because the debt ceiling is not a budget process.
Since President Obama was in office, Republicans have used the debt ceiling as a hostage when there’s a Democratic president, as soon as they get control of the U.S. House of Representatives. They drive the economy up to the cliff and dangle it off, laughing and lying on TV to justify it.
Not only are the Republicans’ means of achieving their policy goals through economic terrorism harmful to the economy, but so so is their “plan.”
It’s difficult to come up with a single point that justifies what Republicans are doing right now. It’s craven cynicism and heartless cruelty.
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Sarah has been credentialed to cover President Barack Obama, then VP Joe Biden, 2016 Democratic presidential candidate Hillary Clinton, and exclusively interviewed Speaker Nancy Pelosi multiple times and exclusively covered her first home appearance after the first impeachment of then President Donald Trump.
Sarah is two-time Telly award winning video producer and a member of the Society of Professional Journalists.