House Republicans must not allow the U.S. to default on its debt. The consequences would be catastrophic.
Last week, former president Donald J. Trump encouraged congressional Republicans to default if the Biden White House does not agree to “massive” spending cuts. He argued that defaulting on debt owed by the U.S. Treasury now is preferable to defaulting on it at some point in the future. Trump’s argument is wrong and the consequences of a default would be devastating to the American economy and its standing in the world.
U.S. Treasury debt is viewed as the safest investment in the world, and its safety is tied to the dollar’s status as the global reserve currency. Countries, banks, and other entities invest in America’s debt because they have faith that we will pay it off. If the U.S. Treasury runs out of money and fails to make payments to bondholders around the world, America’s creditworthiness will be thrust into question.
Other countries already know the U.S. is fiscally irresponsible and running up massive deficits—and the debt is a significant problem—however, our status as the global reserve currency empowers us to keep printing money and avert disaster. If the U.S. defaults on its debt, other countries will begin to dump the dollar. The result is that everyone will be poorer and America will be weaker.
America’s debt problem can be best solved through bipartisan legislation, preferably under the next Republican administration. However, forcing a default could permanently ruin America’s economy. Such action would be harmful economically, but also politically for the GOP. The media would blame Republicans for the crisis, and rightfully so.
America is not unique in its national debt dilemma. While the U.S.’s debt is around 120 percent of its GDP, Japan’s is over 220 percent, Italy’s is almost 150 percent, the United Kingdom’s is 103 percent, and France’s is 92 percent. We are unique, however, in our ability to blow up the global economy and our standing in the world.
At a time when the U.S. is dealing with a banking crisis, mass layoffs, recession fears, and additional threats to the dollar’s status as the world reserve currency, now is not the time to go into default.
Despite public bluster, there is bipartisan consensus that a default would devastate the U.S. economy. In 2019, then-president Trump warned from the Oval Office that House Democrats should not use the debt ceiling as leverage. “I can’t imagine anybody ever even thinking of using the debt ceiling as a negotiating wedge,” he said at the time.
Trump, acknowledging the debt ceiling’s connection to America’s creditworthiness, called it “a sacred element of our country.”
Similarly, both former treasury secretary Steve Mnuchin and current secretary Janet Yellen have written to congressional leaders during their tenures requesting that Congress raise the debt ceiling and warning that the federal government would run out of money if they did not. If that happens, in addition to destroying America’s creditworthiness, payments to federal employees, retirees, veterans, and active duty service members would stop. Borrowing would become more expensive, which would mean the U.S. would pay more interest on the same debt—a losing proposition for the fiscal conservatives advocating for default.
The path forward is clear: negotiate bipartisan spending cuts where possible and bide time until the next Republican administration. At such time, build consensus for a budget that reduces deficits while promoting economic growth and prosperity. There has rarely been a more important time for Congress to act than in the present moment.
Joe Silverstein is a former reporter for Fox News, where he wrote over 300 articles for Fox News and Fox Business. He has also been published in The Wall Street Journal, The American Spectator, New York Post, and elsewhere.
The views expressed in this article are the writer’s own.