In an interview with Fox News Sunday this morning, Rep. Eric Cantor (R-VA), the #2 Republican in the House, threatened to take the nation’s economy hostage if President Obama does not comply with House GOPers’ as yet undefined demands. When asked if he would take a government shutdown on forcing the United States to default on its debt off the table, Cantor responded that it would somehow be President Obama’s fault if House Republicans press this agenda:
QUESTION: Are you willing to say right now we’re not going to let the country go into default, and we won’t allow a government shutdown?
CANTOR: Chris, look at this now. The chief executive, the president, is as responsible as any in terms of running this government. The president has a responsibility, as much or more so than Congress, to make sure that we are continuing to function in a way that the people want.
It’s difficult to exaggerate just how harmful a shutdown or default would be for the United States and its economy. A “shutdown” occurs when Congress fails to appropriate money to fund the federal agencies. As a result, nearly every federal employee is sent home, including the officials who cut Social Security, Medicare and Medicaid checks. In other words, by threatening a shutdown, Cantor is holding the incomes of millions of American seniors hostage unless Obama complies with his petty demands.
The consequences of a default would be even worse — indeed, if a shutdown amounts to a hostage crisis, a default is the equivalent of shooting the hostage. A default could occur if the House GOP refuses to authorize the Treasury to issue new bonds in order to cover the interest on the nation’s existing debt, and the results of such a default would be catastrophic.
If the world’s safest investment — US Treasury bonds — were essentially converted into junk bonds overnight, it would trigger a worldwide financial panic. Meanwhile, the extraordinary economic steps America would need to take in order to mitigate the possibility of a default would pull more than a trillion dollars of spending out of the world economy, potentially triggering a second Great Depression. And even if Cantor eventually backed down, the lasting effects of a default would drive up borrowing costs for the United States — jacking up our national debt in the process.
To date, Cantor has not indicated just how large a suitcase of small, unmarked bills the American people will need to deliver if they ever want to see their economy alive again. But there are early signs that Cantor’s ransom note will make pretty steep demands. After acknowledging that Obama’s offered a hand to House Republicans after this week’s election, Cantor promptly tried to bite that hand off — warning that Republicans are “not going to be willing to work with him” on what Cantor describes as an “expansive liberal agenda.”