Politico today profiled the troubling growth in the number of “default deniers,” Republican Congressman who don’t believe, as most economists and analysts do, that failing to raise the nation’s debt ceiling will result in negative economic consequences. “The case has not been made that this is an absolute necessity,” said Rep. Bill Huizenga (R-MI), for instance. The U.S. officially hit its borrowing limit on Monday, but the Treasury Department can use various measures to stall default until August 2.
One of the leaders of the default deniers is Sen. Pat Toomey (R-PA), who authored a cockamamie bill that he claimed would prevent the U.S. from defaulting on its debt even if the ceiling weren’t raised. (Treasury called Toomey’s legislation “unworkable.”) Today, Toomey delivered a speech at the American Enterprise Institute where he claimed that failing to raise the debt ceiling wouldn’t have an adverse effect on the economy:
As I’ve said before, if we can get the things that I’m looking for, the spending cuts, the reforms in the process, I’m willing to vote to raise the debt limit because it is very disruptive. I don’t think it’s going to have an adverse impact on the economy for the days or weeks or perhaps even months that this would continue, I doubt that it would be that long, I doubt that it would be disruptive to the economy per se, but it would be disruptive certainly to the people who are accustomed to and relying on the programs that would necessarily be cut.
As former Reagan economic official Bruce Bartlett noted, “failure to raise the debt limit not only threatens a default that could potentially roil the entire world financial system, but would potentially deprive federal workers of their salaries, deny payments to businesses for goods and services sold to the federal government, renege on Social Security benefits to retirees, and shortchange savers who depend on interest income.” Bank of America analysts noted that not raising the debt ceiling “would necessitate politically unpopular and potentially economically crippling budget cuts that would likely push the U.S. into recession and drag down the stock market.” It would also make paying off the debt much more expensive (through higher interest rates). Those sure sound like adverse effects.
Former Minnesota Gov. Tim Pawlenty (R-MN) went a step further back in January, saying that failing to raise the debt limit would actually be good for the economy. These Republicans should check in with conservative icon Ronald Reagan, who in 1983 warned of “incalculable damage” to the economy if the debt limit wasn’t raised.