Senator Johnson Recklessly Votes to Allow Default Crisis

Last night, Senator Ron Johnson cast a reckless vote to allow a devastating default crisis that would damage the full faith and credit of the United States. After taking us to the brink of a DHS shutdown and a full government shutdown earlier this year, this is just the latest example of Senator Johnson playing political games with our economic stability.

“By opposing this bipartisan budget compromise, Senator Johnson has voted for default and shown once again that he has no interest in governing responsibly and would rather send our economy into a tailspin than work across the aisle on solutions,” said Sadie Weiner, DSCC Communications Director. “Time and time again, Senator Ron Johnson opts to play reckless, political games instead of looking for reasonable, bipartisan solutions and Wisconsinites deserve better.” 

BACKGROUND: 

Bill Averted Federal Government Defaulting And Reduced Risk Of Government Shutdown Over Next Two Years. “The measure, which was approved by a vote of 266 to 167, with 79 Republicans joining 187 Democrats in favor, averts a potentially devastating default by lifting the federal borrowing limit through March 2017, and it sharply reduces the risk of a government shutdown by setting clear spending targets for the next two years. The adoption of the budget bill, which now goes to the Senate where approval is also expected, was just a part of Mr. Boehner’s departing effort to sweep clean a path forward for his successor, Representative Paul D. Ryan of Wisconsin, who will be formally installed as speaker on Thursday.” [New York Times, 10/26/15

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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