CBO Director Warns GOP Debt Ceiling Tactics Could Cause Higher Debt
This morning, CBO Director Doug Elmendorf issued yet another warning about the dire consequences of failure to raise the debt ceiling, echoing experts on the economy from both parties who have said that refusing to address the debt limit could have catastrophic economic outcomes.
Republicans, who are holding the debt ceiling hostage in an attempt to wring out severe spending cuts, have by and large cherry-picked economists' previous warnings, suggesting that economists agree Congress must prioritize lowering the federal debt itself. Speaker John Boehner (R-OH) even rounded up 150 signatories for a letter asserting as much. But perhaps those focused so single-mindedly on debt and deficit ought to pay attention to Elmendorf's warning that failure to raise the debt ceiling could actually cause higher federal debt. From TPM:
Ironically, Elmendorf noted that one of the potential consequences of even a brief period of default would be higher federal debt, triggered by a spike in interest rates and, thus, higher interest payments on federally issued debt.
"If Treasury rates moved up by just 10 basis points over the next decade, that would add $130 billion to interest payments over the decade," Elmendorf said. A basis point is one-one hundreth [sic] of one percent. Thus, according to Elmendorf, each 0.1 percent increase in interest rates on U.S. Treasuries would amount to a significant increase in U.S. debt.
Of course, congressional Republicans are often quick to deride the CBO's analysis of how various things will impact debt — at least when it doesn't come out in their favor. But they're also happy to tout CBO's findings when it's convenient. In the case of the debt ceiling, the GOP leadership already know that their party's obstructionism could bring "financial disaster" — they just can't quite muster the courage to confront the right-wing freshmen and Tea Party subscribers who are really dead-set against raising the debt ceiling.
Perhaps, if the leadership want to be responsible, they can use Elmendorf's warning as a point of leverage against those whose most adamant justification for their obstructionism is that they don't want to increase the debt itself.