The human face of the dispute to raise debt ceiling
Reaching the debt ceiling will restrict the U.S. government’s ability to finance its operations. It will downgrade government securities by credit rating agencies, increase borrowing costs for businesses and homeowners, and lower consumer confidence. It could shock the U.S. financial market and tip the economy into recession.
According to the White House Council of Economic Advisors (CEA) analysis, a short default would cost half a million jobs and a 0.3% reduction in GDP growth. Some analysts put the unemployment cost of a limited breach to as high as 2 million people out of work. A protracted default would bring 5 million unemployed and a reduction of more than 6% in U.S. growth.
The GOP proposal set the term for settlement of the dispute to lift the debt limit by $1.5 trillion or until the end of March 2024 and bring widespread cuts in federal spending to $4.5 trillion. It would cut discretionary programs by $3.6 trillion over the next decade below the Congressional Budget Office’s recent baseline projection. The cuts would impact funding for veterans’ health care, child care and preschool, medical research, public health, food and drug safety inspectors, Pell Grants and college work-study, K-12 education, environmental protection, housing, and transportation programs. The plan also would reject $70 billion in additional IRS funding, including funding for thousands more agents, made possible by the Inflation Reduction Act.
Under the GOP bill, more than 10 million people in Medicaid expansion states would be at significant risk of having their health coverage removed as they would be subject to the new requirements. This could include low-income adults with disabilities or chronic medical conditions. Based on a 2022 Gallup poll, 52% of the country reported that the care provided is not worth the cost. And in an open-ended question, 38% of respondents, representing an estimated 97 million adults, used the word “expensive” to characterize the healthcare system. In comparison, another 13% used “broken,” the second-most-used word. The probability of being cost-desperate is more than four times greater for households earning under $48,000 per year than those living in households earning $90,000 or more. In addition, fewer than three in five Americans are classified as “cost secure,” meaning they report being able to access and pay for quality care and medicine consistently.
Putting it succinctly, the debt ceiling debate comes down to a clear choice of punishing low-income, disenfranchised, disproportionately people of color, women-headed households and young families. Not lifting the debt ceiling means they will suffer the most from higher unemployment rates. Cutting the existing entitlements will cause them to bear the costs of having less access to already constrained health care and increased debt, and to suffer from a lack of access to dignified living conditions and opportunities for higher education. The onslaught of an unsustainable environment risks the future of all Americans.
It might help to explain why our budget deficit forces us to borrow excessively. The U.S. ranked 32nd out of 38 Organization for Economic Cooperation and Development (OECD) countries in the tax-to-GDP ratio in 2021. The U.S. also had a tax-to-GDP ratio of 26.6% compared with the OECD average of 34.1%. Today the top 1% of earners in the U.S. account for about 20% of the country’s total income annually. Meanwhile, the lowest-earning quarter of Americans accounts for just 3.7% of yearly income.
Economists from the CEA and Office of Budget Management, using a relatively comprehensive measure of income that includes income from unsold stock, determined that the 400 wealthiest American families paid a tax rate of 8.2% for 2010-2018. However, a report by ProPublica recently revealed that this rate is much lower since the 25 wealthiest Americans collectively earned $401 billion but paid just $13.6 billion — about 3.4% of their income in taxes.
According to the Center for American Progress, consecutive Republican governments’ tax cuts added $10 trillion to the debt since their enactment. They are responsible for 57% of the increase in the debt ratio since 2001 and more than a 90% increase in the debt ratio if the one-time costs of bills responding to COVID-19 and the Great Recession are excluded.
We need to tell House Speaker Representative McCarthy that it is about time he and his colleagues in Congress stop their policies of slashing and burning the dreams of millions of Americans to support greater plunder of their corporate patrons and top billionaires. I am not sure if putting the betterment of the lives of our present and future generations ahead of the self-centered adventures of some of our politicians has a place in the culture of greed that is destroying the lives of millions of Americans.
Jamshid Damooei, Ph.D., is the executive director of the Center for Economics of Social Issues and director of the undergraduate economics program at California Lutheran University.
This article originally appeared on Ventura County Star: The human face of the dispute to raise debt ceiling
