WASHINGTON -- The House Republican plan to have showdowns over both funding the government and raising the nation's debt limit could have severe consequences for the overall U.S. economy, non-partisan analysts said Wednesday.
The concern surrounding a potential political fight over the country's borrowing cap next month was highlighted prominently by Moody's economist Mark Zandi, a former adviser to Sen. John McCain (R-Ariz.) who testified at a joint congressional hearing Wednesday on "The Economic Costs of Debt-Ceiling Brinkmanship.”
The debt limit, which stands at $16.7 trillion, authorizes the Treasury Department to pay for the spending that has already been authorized by Congress. Treasury officials warned in the spring that they had begun taking extraordinary measures to keep the government's bills paid, and would likely have to default on some payments in mid-October if Congress did not grant borrowing authority that equals the spending it has written into law.
Such a default would be devastating, Zandi warned.
"You need to raise the debt limit. There's no other option," he told lawmakers. "Otherwise, it's disastrous. It's counterproductive to your own goals because it's going to result in a recession, bigger deficits and raise the debt."
House Speaker John Boehner (R-Ohio) argued earlier on Wednesday that the debt limit is often used as a negotiating lever for politicians, and Rep. Sean Duffy (R-Wis.) made the same point during the hearing, asking why Democrats shouldn't be more willing to talk over Republican demands.
Much like Democrats who released their own report on the topic, Zandi noted, however, that in the last showdown over the debt ceiling two years ago, the U.S. government's credit rating was downgraded and the stock market tanked.
"You can only put the gun to your head so many times before someone's going to make a mistake and pull the trigger, and it's to everyone's detriment," Zandi told Duffy.
He gave a crushing summary of the potential impacts of a default.
"If you don't raise the debt limit in time, you will be opening an economic Pandora's box. It will be devastating to the economy," he predicted. "If you don't do it in time, confidence will evaporate, consumer confidence will sharply decline, [as well as] investor confidence, business confidence. Businesses will stop hiring, consumers will stop spending, the stock market will fall significantly in value, borrowing costs for businesses and households will rise."
"We'll be in the middle of a very, very severe recession, and I don't see how we get out of it," he added.
News was not much better on the GOP proposal to shut down the government at the end of the month if the Senate and President Barack Obama don't agree to defund Obamacare.
According to CNN, Douglas Elmendorf, the head of the non-partisan Congressional Budget Office, warned that even posturing over a shutdown costs the government and the economy.
"We have now started to prepare for the possibility of a shutdown at CBO -- taking time and energy that we'd otherwise spend in serving Congress more directly," Elmendorf said. "At agencies that are larger and more complicated, the planning for the shutdown is much more involved."
If the government closes, the economic impacts "scale up" quickly, he said.
Even the U.S. Chamber Of Commerce, generally an ally of the GOP, warned that failing to keep the government funded after Sept. 30 would be bad for business, as would a debt-ceiling standoff.
"It is not in the best interest of the U.S. business community or the American people to risk even a brief government shutdown that might trigger disruptive consequences or raise new policy uncertainties washing over the U.S. economy," Bruce Josten, the Chamber's vice president of government affairs, said in a letter to lawmakers Wednesday.
He also argued that creating uncertainty over the debt limit is harmful.
"Likewise, the U.S. Chamber respectfully urges the House of Representatives to raise the debt ceiling in a timely manner and thus eliminate any question of threat to the full faith and credit of the United States government," Josten wrote.
Michael McAuliff covers Congress and politics for The Huffington Post. Talk to him on Facebook.
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