ThinkProgress filed this report from the Faith and Freedom Conference in Washington, DC.
As the debt ceiling fight drags on, many Republicans are dismissing concerns about the effect a default could have on our national economy. ThinkProgress spoke with one such GOPer, Rep. Ron Paul (R-TX), over the weekend to get his thoughts about what would happen if we pass the August 2nd deadline without raising the debt ceiling.
Paul, who is running for president, claimed we are already in default but that the government was mitigating the effects through inflation. He downplayed concerns that not raising the debt ceiling by August 2nd would lead to financial collapse, arguing instead that it might be a “positive thing” because it would allow us to symbolically show we’re “serious”:
KEYES: Congressman, there’s been a lot of heated rhetoric about this upcoming debt ceiling fight. Do you think it’s really going to be that bad if a default were to happen come August 2nd?
PAUL: Well, they’re not going to let it happen. They’re going to do it. But I try to tell people, a default is already occurring, it’s just how they do it. Governments always default, but most of the time, they don’t quit paying their bills because they’ll just print the money. They default by giving you money back that doesn’t have as much value and that’s when prices go up. So that’s how they’re defaulting and since there’s inflation back and hurting us, there’s plenty of default going on right now.
KEYES: Do you think though if we avert this August 2nd deadline by passing an increase in the debt ceiling, we’re missing an opportunity to perhaps teach a lesson like you’ve been talking about?
PAUL: No, I think if you didn’t raise it, people say it would be the end of the whole system, but maybe people will say, “hey, maybe they’re serious!” And maybe it would be a positive. That’s what we should do because if we continue to do this, we’ll destroy the dollar.
KEYES: It could be a positive thing though?
PAUL: I think it’s possible, but it’s not predictable.
When Rep. Michele Bachmann (R-MN) proposed a similar idea in April, Washington Post writer Ezra Klein called it “The scariest thing I’ve ever heard on television.” The result would be an “economic death spiral” of skyrocketing interest rates and the end of the dollar “as the world’s reserve currency.”
Sen. Lindsey Graham (R-SC), a leading voice on the right, told CNN that failing to raise the debt ceiling would result in “financial collapse and calamity throughout the world.” Even House Majority Leader Eric Cantor (R-VA) told ABC News today that he doesn’t “question the Secretary of the Treasury” on his August 2nd deadline to raise the debt ceiling in order to prevent catastrophic economic consequences.
An analysis by Michael Ettlinger at the Center for American Progress found that “failing to raise the debt limit for two months could cause a bigger GDP drop than that experienced during the Great Recession of 2008.” Last week, the rating agency Moody’s threatened to downgrade the United States’ credit rating if the debt limit isn’t increased.
Yet for Republicans like Paul and Bachmann, such dire warnings fall on deaf ears.