Democratic Senatorial Campaign Committee: GOP fright fest: Ron Johnson inches closer to a devastating default crisis

Democratic Senatorial Campaign Committee: GOP fright fest: Ron Johnson inches closer to a devastating default crisis
10/26/2015 

Contact: Sadie Weiner – 202-545-3518  

With a default crisis looming just days away, Republicans in Washington like Ron Johnson continue to inch us closer to a potential economic catastrophe. Their only “plan” has been to sit back and let the House – which is currently mired in chaos and dysfunction – act first. Headlines like this one from the Washington Post “Senate to House on debt limit vote: You first,” and this one from The Hill “Senate waiting for House on debt ceiling” are blaring, but the House efforts to stop a crisis have predictably fallen apart. From Politico: 

House GOP leadership is likely to abandon tentative plans to vote on a Republican Study Committee-penned bill to lift the debt limit, throwing into question how Congress is going to lift the borrowing limit before a Nov. 3 deadline. 

House leadership was considering a vote on the Terms of Credit Act Friday, but several GOP insiders said they will not put the bill on the floor. A Wednesday night whip check showed the party several dozen votes short, according to multiple sources familiar with the count. 

Meanwhile, after already taking us to the brink of a DHS shutdown and a full government shutdown this year, Senator Ron Johnson has done absolutely nothing to stop a potential default crisis. 

“As Senate Republicans continue to manufacture one crisis after another this time leading us closer to a default with each passing day, Senator Ron Johnson is playing a very dangerous and frightening game with our economy and the security of middle class families,” said Sadie Weiner, DSCC Communications Director. “A default would have a disastrous impact on our economy at a time when many working families are just regaining their footing, but Senator Johnson seems to care more about Washington parlor games than stopping this catastrophe and Wisconsin families deserve better.” 

BACKGROUND: 

Head Of World’s Largest Bond Fund Said Failure To Raise The Debt Ceiling Would Be “Catastrophic” And Cause The Stock Market To “Plunge.” “But most analysts take a darker view. Bill Gross, who runs Pimco, the world’s biggest bond fund, said in an e-mail that failure to raise the debt ceiling would be ‘catastrophic — global investors would move money at the margin to countries which have their act together, interest rates might rise by 50 basis points overnight, the stock market would plunge.’” [Washington Post, 4/26/11]  

JPMorgan Study Showed Even A Brief Default Could Lead To A Spike In Interest Rates That Could Cost The Government As Much As $75 Billion A Year And Increase Cost Of Buying A Car Or Getting A Mortgage. “The last time this looked like a serious threat in 2011, analysts at JPMorgan looked at the probable "domino effects’ of the Treasury default, and they weren't pretty. What if the dominoes start falling? Among the ‘long-term adverse consequences for Treasury finances and the U.S. economy’ of even a brief default, the JPMorgan analysts figured the list includes a spike in interest rates as investors find other places to put their cash. Those higher rates could cost the government as much as $75 billion a year, they estimated. But that's only the beginning. Those higher rates would flow through the rest of the economy, raising the cost of buying a new car or getting a new mortgage.” [CNBC, 10/9/15] 

Former CBO Director And McCain Economic Advisor Doug Holtz-Eakin Said Default Would Have “Dramatic Impacts On Consumer Confidence” That “The World’s Melting Down Again.” “Without a hike, the specter of a default on U.S. obligations looms large — potentially setting the stage for significant market turmoil and dire consequences for America’s financial reputation across the globe. ‘The first thing you’ll see is a market reaction,’ said Doug Holtz-Eakin, head of the right-leaning American Action Forum and a former director of the Congressional Budget Office. ‘Then you’ve got dramatic impacts on consumer confidence, the world’s melting down again and they go into an economic fetal position … there’s just no good news there.’” [The Hill, 10/16/15] 

· Holtz-Eakin Said Default Crisis Would Lead To “Very Bad Economic Outcomes” And “Chaos In The Financial Markets.” “‘Without a hike, the specter of a default on U.S. obligations looms large — potentially setting the stage for significant market turmoil and dire consequences for America’s financial reputation across the globe.’ said Douglas Holtz-Eakin, former Congressional Budget Office director, now president of American Action Forum.” [CNN, The Lead, 10/8/13] 

Federal Reserve Chairwoman Janet Yellen Said Default Crisis Would Be “Catastrophic.” “The results of not lifting the statutory limit on borrowing would be ‘catastrophic,’ Ms. Yellen said. ‘Even in the run-up to the last debt ceiling crisis, [one] could see market participants taking steps in advance of that.’” [Wall Street Journal, Money Beat, 2/11/14] 

CNBC: If Treasury Stopped Paying Government’s Bill, It “Could Hit Everyone From Small Business Government Contractors To Social Security Recipients” To Reimbursements To Doctors Treating Medicare Patients. “If the Treasury abruptly stopped paying the government's bills, the freeze could hit everyone from small business government contractors to Social Security recipients to doctors getting reimbursed for treating Medicare patients.” [CNBC, 10/9/15]

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