Van Hollen, Schatz Reintroduce Legislation to Avoid Catastrophic Debt Default
U.S. Senator Chris Van Hollen (D-Md.) joined Senator Brian Schatz (D-Hawai‘i) in reintroducing legislation to avoid default by repealing the national debt ceiling, an arbitrary limit set by Congress on the amount of funding that the United States Treasury may borrow.
“A debt default by the United States would throw our economy into chaos and trigger massive job losses. It is time to defuse this economic time bomb that is repeatedly and recklessly used to threaten an economic doomsday in order to impose a radical political agenda. Let’s focus on real budget solutions to meet or national priorities in a fiscally responsible way,” said Senator Van Hollen.
“Defaulting on our debt would be an economic catastrophe for everyone – families, veterans, seniors. Congress has the chance to debate federal spending, and it’s well before the bill comes due,” said Senator Schatz. “Republicans are using the debt limit to hold the country hostage. We need to stop playing this very dangerous game with the nation’s economy and get rid of the debt ceiling.”
The legislation led by Senator Schatz is cosponsored in addition to Senator Van Hollen by U.S. Senators Bob Casey (D-Pa.), Mazie K. Hirono (D-Hawai‘i), Michael Bennet (D-Colo.), Ben Ray Luján (D-N.M.), Dick Durbin (D-Ill.), Martin Heinrich (D-N.M.), Elizabeth Warren (D-Mass.), Chris Murphy (D-Conn.), and Tina Smith (D-Minn.).
“Year after year, the fight over the debt ceiling is weaponized as a manufactured political crisis that has nothing to do with fiscal responsibility and seriously threatens small businesses, workers, and our economy. We cannot allow House Republicans to hold the entire American economy hostage to score a few political points. It’s more urgent than ever that we eliminate the debt ceiling to permanently lift the threat of default from our economy and focus on our work for the American people,” said Senator Bennet.
“With Republicans steering us toward a debt default, it's more critical than ever to eliminate the debt ceiling to ensure that the United States meets our financial responsibilities. Congressional Republicans cannot keep playing this dangerous political game that threatens the economic security of hardworking families and undermining the global economy,” said Senator Luján. “I'm glad to join my colleagues in introducing this urgently needed legislation.”
“When Congress can’t reach a consensus on raising the debt ceiling, the American people lose. It’s dangerous and fiscally irresponsible to play games with the debt ceiling at the risk of our nation’s economic wellbeing,” said Senator Durbin. “I’m joining my colleagues to introduce legislation to repeal the national debt ceiling for the sake of the American people and for the good of our economy.”
“Democrats are focused on creating jobs and lowering costs for Americans. Meanwhile House Republicans are barreling towards default. We can’t let Republicans keep gambling Social Security, Medicare, and more with their default threats. We need to eliminate these manufactured crises once and for all,” said Senator Heinrich.
“Political fights over the whether to default on the nation’s debt don’t just put the economy in danger, they’re entirely unnecessary,” said Senator Smith. “The U.S. is one of just two democracies in the world with a statutory debt ceiling. By keeping it in place, we are choosing to flirt with an economic recession every time Republicans use it as political leverage. This artificial debate is about paying the bill for money we’ve already spent, not about fiscal responsibility. We should get rid of the debt limit altogether and make clear that the U.S. will never drive the nation into default. That would eliminate the political brinksmanship and allow us to turn our focus to more urgent issues.”
In practice, the debt limit has no impact on government spending, which is authorized and approved through the federal budget and appropriations process. Instead, the ceiling restricts the U.S. Treasury from paying for expenditures already made by Congress. This disconnected process consistently requires Congress to raise the ceiling before it is reached. In recent years, this has become a politicized procedure that often leads to threats of defaulting on the government’s obligation to pay its bills. A default would be catastrophic and would likely trigger a recession. Military pay, Social Security and Medicare payments, and Treasury bond yields would all be disrupted.
The United States is one of only two democratic countries with a statutory debt ceiling, and the only one that could single-handedly cause a global recession. Since 1960, Congress has acted more than 75 separate times to raise, temporarily extend, or revise the definition of the debt limit. In 2011, the crisis surrounding raising the debt ceiling led credit rating agency Standard & Poor’s to downgrade the U.S. government’s credit rating for the first time ever.
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