"I'm a fiscal conservative, and you've gotta put the pin back in the grenade right now."
- Sloan Sabbith, The Newsroom
As a 50-something person who has been denied health insurance due to a pre-existing condition, I fear the loss of Obamacare.
However, as a small business owner, responsible for my family's welfare and my employees' jobs, I am much more fearful of a failure to raise the debt ceiling.
The full scope of a failure to raise the debt ceiling is beyond comprehension. On September 18, Mark Zandi, chief economist at Moody's Analytics, told the congressional Joint Economic Committee that approximately nine percent of US economic output would evaporate if the government is constrained to spending only what it takes in. This equates to $1.5 trillion vanishing from our economy. "We'll be in the middle of a very, very severe recession, and I don't see how we get out of it," Zandi said.
While some aspects of this scenario are quantifiable, others are not. For example, the incalculable effect of the end of the dollar as the global reserve currency, as global financial markets pivot away from the former security of US debt, once faith in this bedrock of the financial world is shattered. This affects trillions of dollars in derivatives and other financial products that are benchmarked to US debt.
The stock market reaction will be severe, eviscerating hundreds of billions of dollars in wealth and personal savings. As dire as this may seem, it pales in comparison to the real potential for runs on money market accounts as confidence in the US financial system crumbles. As unimaginable as this may seem, it happened as recently as September 2008, when $16.7 billion in deposits were withdrawn from former rising star Washington Mutual during a 9-day bank run, resulting in the nation's largest bank failure. The FDIC was spared a catastrophic hit to its then $45 billion fund as a result of WAMU's shotgun fire sale to JPMorgan Chase.
The central irony of the debt ceiling debate is that failing to raise the debt ceiling actually drives up the nation's debt. This is attributable to a combination of dramatically reduced tax revenue due to the economic depression that will result from failure to raise the ceiling, combined with escalated borrowing costs (estimated to increase as much as $75 billion annually). Those claiming that messing with the full faith and credit of the United States is somehow fiscally responsible are not only factually wrong, they are playing a recklessly dangerous game with the livelihoods of millions of Americans.
The full faith and credit of the United States is not a throwaway punch line. It is the very foundation of the US economy, and a fundamental anchor that the world relies upon. Millions of jobs and trillions of dollars of commerce are built upon it. The consequences of compromising global confidence in America's economic underpinnings are so vast and dire and destructive that if it were perpetrated on this country by a foreign entity, it would be declared an act of war or terrorism.
This small business owner is asking Congress to do the responsible thing, step back from the brink, and put the pin back in the grenade.