In the runup to the 2022 midterm elections, the Republican Party promised voters an end to inflation, though party leaders provided very few specifics
Now that Rep. Kevin McCarthy of Bakersfield has surrendered to a small group of GOP budget radicals, a plan has crystalized: default on the national debt and cause a worldwide depression.
A depression is a surefire way to end inflation. After a stock market crash and widespread unemployment and foreclosures, prices for everything from eggs to autos to homes will come down because there will be so few buyers. It’s what happened in 1929.
The radical Republicans plan to hold the U.S. economy hostage and threaten to shoot unless their demands for budget cuts are met. The Washington Post reported this weekend that Texas Rep. Chip Roy and others are working on a list of which payments to prioritize after a default. Apparently their plan is to put bondholders first, social services last in hopes Wall Street won’t go into shock.
House Oversight Committee Chairman James Comer, a Republican from Tennessee, issued an ultimatum Sunday in an interview with CNN.
“We hope that this is avoided. We hope that the Senate, House — Democrats and Republicans — will agree to spending cuts,” he said.
The Republican economic hostage threat is supposedly based on a concern that America is spending beyond its means. But raising the debt limit doesn’t automatically increase the deficit. It simply enables the Untied States to meet its previous obligations.
And while the deficit is big, it’s equal to just a little more than one year of U.S. national income — the gross national product. Most California residents have home loan balances equal to way more than one year of income yet don’t consider that a crisis.
Imagine the radical Republican scenario translated into everyday life. You have plenty of income to pay your debts, but you suddenly decide not to. Soon your home and car are repossessed, your credit score tanks, you lose your job, and eventually you declare bankruptcy.
At a global level, a U.S. default would sink the stock market, spark a depression that puts tens of millions of Americans out of work and gut the U.S credit rating — perhaps ending the role of the dollar as the international reserve currency and handing that privilege to the Chinese yuan.
A decade ago, the Tea Party took the U.S. economy to the brink of default. A last-minute deal prevented catastrophe, but it crippled defense spending for years and the brinkmanship prompted Standard & Poors to lower the U.S. credit rating for the first time.
Maybe cooler heads will prevail again. Back in 2011, Rep. Darrell Issa of Vista voted to raise the debt ceiling and avoid ruin, saying “America’s never bounced a check.” He was one of the few Republicans to break ranks and save the economy.
But since then Issa has moved to the right. If we learn that Issa and other wealthy Republican lawmakers are selling their stock holdings, then there’s a clear indication default is looming. And everyone’s life savings will be at risk.
Republican firebrand Roy has a photo on his Facebook page of his family gathered around an old, rusting tractor on a farm in Texas. That’s an appropriate image for a diminished America in the wake of a Republican-led default and depression.
Chris Jennewein is editor and publisher of Times of San Diego.