US Treasury says it starts
long before Doomsday deadline
“Postponing a debt ceiling increase to the very last minute
is exactly what our economy does not need.”
- Treasury Secretary Jacob J. Lew
U.S. Treasury Secretary Jacob Lew issued a stark warning on Thursday. Click image to enlarge.
AS THE TOTALLY unnecessary U.S. government shutdown continued to damage the world’s biggest economy for a third day, the U.S. Treasury issued an alarming report that fallout from the next crisis would not wait until Doomsday on Oct. 17.
It is already starting, and will grow worse as the deadline approaches, the Treasury warned, but the die-hard lunatics in the House of Representatives – who’s income puts them in the top one percent of Americans – refuse to recognize reality.
The radical right sees only as far as the end of its nose. It cannot smell a catastrophe in the making, one that could have global implications.
The Treasury warned we could see a recession much worse than that of 2008, and a global financial crisis to match.
WE MENTIONED the looming battle over the debt ceiling on Tuesday in Shutdown a major headache for many, but much worse may lie ahead.
It has been a concern of those In the (K)now for months.
The warning from the U.S. Treasury was stark in its report released Thursday titled The Potential Macroeconomic Effect of Debt Ceiling Brinksmanship.
“Unprecedented default could result in recession comparable to or worse than 2008 financial crisis,” was the sub-headline.
The announcement on the web site of the U.S. Treasury. Click image to enlarge.
The report states that a default would be unprecedented and has the potential to be catastrophic: credit markets could freeze, the value of the dollar could plummet, and U.S. interest rates could skyrocket, potentially resulting in a financial crisis and recession that could echo the events of 2008 or worse.
“By looking at the disruptions to financial markets that ensued in 2011, the report examines a variety of economic indicators – including consumer and small business confidence, stock price volatility, credit risk spreads, and mortgage spreads – through which a similar episode might harm the economic expansion,” according to the Treasury.
But the lunatics in the GOP don’t’ care. We reported on how crazy they are Sept. 19 in GOP digs in over Budget – for no rational reason
The Treasury report is based on an analysis of the effects of the brinkmanship indulged in by the Republicans in 2011 – the last time they drove the country to the brink of default.
“As we saw two years ago, prolonged uncertainty over whether our nation will pay its bills in full and on time hurts our economy,” Treasury Secretary Jacob J. Lew said. “Postponing a debt ceiling increase to the very last minute is exactly what our economy does not need – a self-inflicted wound harming families and businesses.”
So, we do not have to actually wait for the deadline to arrive; the damage begins long before that, and is already starting.
The most sensitive indicators – the bond and stock markets – are already showing signs of strain. Look at the way the markets plunged on Thursday in anticipation of worse to come.
“Our nation has worked hard to recover from the 2008 financial crisis, and Congress must act now to lift the debt ceiling before that recovery is put in jeopardy,” Lew added.
The report notes that even the possibility of a default could roil financial markets and damage the economy, thereby harming American businesses and households.
“The U.S. dollar and Treasury securities are at the center of the international finance system. In the catastrophic event that a debt limit impasse were to lead to a default on Treasury securities, financial markets could be shaken to their core as was seen in late 2008, which resulted in a recession worse than any seen since the Great Depression,” the report said.
THAT IS DIRE news indeed. So it makes the debate now unfolding over how the president could respond to the threat of the GOP holding a gun to his head almost obsolete.
The New York Times featured views of six experts on this page. Click image to enlarge.
That debate was on full display in the press, most prominently in The New York Times online on Thursday, which displayed the differing views of six experts on the topic in Can Obama Ignore the Debt Ceiling?
An introduction to the debate reads:
“As the government shutdown continued on Wednesday, President Obama not only urged an end to that impasse but also asked Congressional leaders to avoid a showdown later this month on increasing the nation’s borrowing limit.
“But a growing number of observers have said the president can and should ignore the debt limit … ”
The question it then asked the experts to address was this:
“Can President Obama unilaterally ignore the debt ceiling and issue debt after the limit has been reached to keep the government running?”
The answers, of course, were all over the map.
Eric Posner, a professor of constitutional law at Florida International University College of Law said Only Congress Can Raise the Debt Ceiling.
An opposing view, Creditors’ Power Exceeds the President’s, was expressed by Thomas Geoghegan, a labor lawyer in Chicago.
Government Doesn’t Have to Borrow to Spend was the opinion of James K. Galbraith, a professor of government and business relations at the University of Texas.
Of note, was the contribution of Akhil Reed Amar, a professor of law and political science at Yale University who wrote GOP Stand on Debt Gives Checkbook to Obama.
And, perhaps the most sensible and straight forward, was Dorothy A. Brown, professor of law at Emory University School of Law, who wrote Keep the Judges Out of It and Keep Negotiating.
But this entire debate, illuminating as it is, may be moot by the time decision day arrives.
The GOP has definitely gone insane, as we first reported Aug. 6 in GOP losing its grip on reality: fantasy ‘policy’ proposals abound
The economic damage the Republican Party is causing has started already. It will only get worse over the coming weeks. And it will take years to fix, if it ever can be.
There is no time to waste.
The U.S. and the world cannot endure another round of brinkmanship as Congress remains blind to the damage it is inflicting on millions everywhere, not just in America.
It is time for the politicians to come to their senses.
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