U.S. Treasury Secretary Jack Lew told Congress on Thursday that failure to raise the debt limit would not only have a catastrophic impact on the global economy but would have a negative effect on everyday Americans.
“The bottom line is that failing to raise the debt ceiling creates a very difficult and unfair situation, and one that is completely avoidable if Congress acts,” Lew said.
Lew pointed to a number of large payments due just after the Oct. 17 deadline to raise the debt ceiling, including to Medicare providers, Social Security beneficiaries, service members and veterans.
“A failure to raise the debt limit could put timely payment of all of these at risk,” Lew said. “We need to look no further than 2011 for evidence of what just an extended debate on the merits of raising the debt limit can do to our economy. In 2011, U.S. government debt was downgraded for the first time in history, the stock market fell, measures of volatility jumped and credit risk spreads widened noticeably; these financial market effects persisted for months. To be sure, other forces both at home and abroad also played a role, but the uncertainty surrounding whether or not the U.S. government would pay its bills had a lasting impact on both markets and the economy.”
Additionally, Lew criticized arguments against raising the debt ceiling, calling them “irresponsible” and “reckless.”
“Certain members of the House and Senate believe that it is possible to protect our economy by simply paying only the interest on our debts, while stopping or delaying payments on a number of our other legal commitments,” Lew said. “The United States should not be put in a position of making such perilous choices for our economy and our citizens. There is no way of knowing the irrevocable damage such an approach would have on our economy and financial markets.”