The Risks of Debt Default on the Economy and Jobs

Testimony Before the Congressional Democratic Policy and Steering Committee

SOURCE: Center for American Progress

CAP Senior Economist Heather Boushey testifies before the Congressional Democratic Policy and Steering Committee. Read the testimony (CAP Action).

Thank you for inviting me here to testify today on the implications for jobs and the economy of not raising the debt ceiling. My name is Heather Boushey and I’m a Senior Economist with the Center for American Progress Action Fund.

This is a critical issue and one, as Professor Blinder has said, that should not be controversial. It’s absolutely necessary to raise the debt limit and it should be done immediately. But in many ways, this conversation is not about the pros and cons of forsaking the full faith and credit of the United States. It’s about pivoting from job-creation policies to deficit reduction and potentially sharp cuts in spending.

The government debt has been rising. It was high before the Great Recession, as tax cuts for the wealthy and two unfunded wars drained America’s coffers. We spent too much and took in too little in taxes during the good economic years when we should have been shoring up our budget situation.

Now, however, we face an even more daunting economic problem: sustained high unemployment. We will not be able to solve our nation’s budget woes until we get people back to work. Sustained high unemployment has caused revenues to fall sharply over the past two years, even as expenditures have become more necessary.

CAP Senior Economist Heather Boushey testifies before the Congressional Democratic Policy and Steering Committee. Read the testimony (CAP Action).