Economists of all stripes agree that an American default on its debt would spell catastrophe.
But that doesn’t mean House Republicans believe them.
A band of Tea Party-inspired conservatives doesn’t buy that hitting the debt ceiling on Oct. 17th will be the calamity that the Treasury, the International Monetary Fund, the top ratings firms and even their party leaders have warned. They brush off the implications as either exaggerated or downright imaginary.
Here are some of the leading debt ceiling deniers and a look at their arguments:
Default could mean good news
Rep. Ted Yoho unseated longtime Republican Cliff Stearns in a Florida primary race last year, taking Stearns on from the right.
He argues that a default might actually be good for the economy.
“I think we need to have that moment where we realize [we’re] going broke,” said Yoho to the Washington Post. “I think, personally, it would bring stability to the world markets,” he continued, on refusing to raise the debt ceiling.
This argument has been widely disputed by market analysts who say the exact opposite is likely.
Yoho is an important figure because he’s the kind of candidate Republicans fear: an unknown tea partier able to unseat even a powerful, well-funded incumbent.
Rep. Mo Brooks of Alabama made a similar pitch back in 2011, the last time Congress faced this impasse. In mid-July, Brooks said to the Washington Post that, “In fact, our credit rating should be improved by not raising the debt ceiling.”
Two weeks later, he was swiftly proven wrong. Congress ending up reaching an 11th-hour agreement to raise the debt ceiling, but it was too late. The S&P 500 index lost 3%, and downgraded the U.S. credit rating from AAA to AA-.
“We hope the United States fully understands the lessons of history,” said Zhu Guangyao, vice finance minister of the People’s Republic of China, America’s biggest foreign creditor.
It’s not a big deal
Other Republican lawmakers haven’t gone as far as to claim an economic boost from refusing to raise the debt ceiling, but they have argued that a failure to do so would bear little consequence.
“I would dispel the rumor that is going around that you hear on every newscast that if we don’t raise the debt ceiling we will default on our debt,” said Sen. Tom Coburn Monday on CBS. “We won’t.”
Rep. Steve King of Iowa made a similar claim last week, when he called default talk “false demagoguery,” on CNN.
“I don’t think the credit of the United States is going to be collapsed,” said King. “We have plenty of money coming in to service the debt. When we stop servicing the debt, that would be default. We’re a long, long ways from that.”
Going to the brink is a good thing
Some Republicans argue that America shouldn’t default, but going right up to the edge is a good idea because it’ll force concessions from Barack Obama.
Texas Rep. Joe Barton called default warnings “nonsense” on CNBC Monday, insisting that a failure to raise the debt ceiling would force the administration to prioritize which bills to pay. Under this scenario, interest payments to the nation’s bondholders would come before everything else.
“The president can be smart or the president can be stupid,” said Barton. “And I would assume as smart as President Obama is when push comes to shove, he’ll be smart.”
Experts do see some options for President Obama to avoid default in the event that Congress fails to raise the debt ceiling, but concede that they’re all “politically unattractive, unpalatable to the financial markets and subject to legal challenges,” the New York Times reports. The White House insists that only Congress can authorize the Treasury to pay its bills.
Republican Rep. Mick Mulvaney of South Carolina accused Obama and White House officials of being deliberately dishonest about the risk of default. “If the president wants to lie to the public, I can’t stop him,” he said to the National Journal.
Republican Rep. John Flemming of Louisiana has also cast blame on the president while declaring that “nothing happens” if the debt ceiling is reached.
“Technically, it’s not possible to default because there’s always enough revenue to cover the interest,” he said to Politico last month. “If we defaulted it was because the president chose to default, not because we ran out of money.”
Debt ceiling, shutdown — no difference
In January, Texas Sen. Ted Cruz, one of the main drivers of the government shutdown, conflated the current crisis with the one that would ensue should Congress fail to raise the debt ceiling. “What would happen if the debt ceiling isn’t raised is … a partial government shutdown,” he said on conservative talk radio.
President Obama on Monday stood firm is his demand that Congress raise the debt ceiling and avert what would likely be a financial catastrophe.
“This is something routine, it’s been done more than 40 times since Ronald Reagan was president, it has never before been used in the kind of ways that Republicans are talking about using it right now,” Obama said at FEMA’s National Response Coordination Center in Washington D.C. “We can’t threaten an economic catastrophe in the midst of budget negotiations. So authorize the Treasury to pay America’s bills.”