Last year the House Republicans led by Rep. John Boehner (R-OH), held the American economy hostage by refusing to raise the debt limit until Republican spending cuts were enacted.
Once again Boehner and his colleagues are threatening to not raise the debt limit until they get their way. Once you give into a person who takes a hostage, that person will use the same strategy again to get their way.
Bloomberg News did an analysis on last year’s debt ceiling fight:”Our analysis of that episode leads to a troubling conclusion: It almost derailed the recovery, and this time could be a lot worse.”
You would think that the Republicans wouldn’t do that again since it was so hard on the economy last time. That is, unless derailing the economy is your goal. For the Republicans, the economy going off the rails would be like manna from Heaven. Whenever you look at what the Republicans are doing you must keep this statement from Senate Minority Leader Mitch McConnell, (R-KY) in mind: “The GOP’s number one priority is making Barack Obama a one-term president.” Not governing, Not helping to improve the economy. just defeating President Obama. Because of that statement, it is entirely plausible that the Republican Party would sink the economy to win the White House.
Here are a couple of charts from Bloomberg News that show how last year’s debt ceiling debacle hurt the economy in stark relief:
This chart shows how badly consumer confidence suffered when Americans thought that the full faith and credit of the United States was threatened by the Republicans in the House of Representatives.
This chart shows how hiring also fell as business owners weren’t sure if the economy was going to hit the toilet.
“All told, the data tell us that a debt-ceiling standoff is an act of economic sabotage. The only way to avoid this conclusion is to argue that consumers and employers were reacting to some other economic factors. But the debt ceiling was the dominant economic story at the time. No other news fits the data as well. Although the European debt crisis was a rising concern throughout 2011, the real trouble in Europe arose in the period when consumer confidence and employment were recovering.
The next debt-ceiling battle could be worse, because the stakes are even higher. In addition to the threat of default, the U.S. is facing the so-called fiscal cliff: a raft of spending cuts and tax increases that will happen at the end of this year unless Congress acts to postpone them. Another stalemate would almost certainly plunge the economy into a deep recession. Our best alternative — in fact, our only hope — is for Congress to set aside partisan politics and work together with a common goal of helping our country out of the Great Recession.”
Read the full article at Bloomberg News: Debt-Ceiling Deja Vu Could Sink Economy