“…It’s a case of déjà vu all over again on the debt ceiling debate.
Republicans, who regained control of the House of Representatives[1] in November 2022, are threatening to not allow an increase in the debt limit[2] unless they get unspecified spending cuts in return. In so doing, they risk pushing the U.S. government into default.
Brinkmanship over the debt ceiling has become a regular ritual[3] – it happened under the Clinton administration[4] in 1995, then again with Barack Obama as president in 2011[5], and more recently in 2021[6].
As an economist[7], I know that defaulting on the national debt would have real-life consequences. Even the threat of pushing the U.S. into default has an economic impact. In August 2021, the mere prospect of a potential default led to an unprecedented downgrade[8] of the the nation’s credit rating, hurting America’s financial prestige as well as countless individuals, including retirees.
And that was caused by the mere specter of default. An actual default would be far more damaging…”