As the U.S. nears the final date to raise the debt ceiling, a chorus of Republicans have downplayed the hard deadline and insisted the Treasury can “prioritize” its commitments to debt interest payments and to critical programs. But on Meet the Press with David Gregory, International Monetary Fund managing director Christine Lagarde debunked the claim that “creative accounting” would solve anything.
Lagarde likened the consequences to the financial market crash in 2008, warning that failure to increase the ceiling by October 17 would send the U.S. economy into a tailspin. “That lack of certainty, that lack of trust in the U.S. signature, it would mean massive disruption the world over and we would be tipped again into massive rupture,” she said.
GREGORY: You know, there are some figures in our government and congress, Senator Rand Paul, others who say, you know, this is overstated. The treasury can do things and that the concept of default is hyperbole.
LAGARDE: But creative accounting is not the solution. And markets know that. The counterparts to the United States know that. And when you are the largest economy in the world, when you are the safe haven in all circumstances, as has been the case, you can’t go into that creating accounting business. You have to honor your signature, you have to give certainty to the rest of the world, and you have to make sure that your own economy is consolidating that welcome recovery that we have seen in the last few days because it impacts the entire economy.
Thirteen days of the government shutdown have already cost the economy more than $1.6 billion. But playing games with the debt ceiling stalemate threatens to contract the American economy even further and cost taxpayers hundreds of billions of dollars.