In 2011, the last time the country faced a debt-ceiling showdown, Republican lawmakers took away an important lesson: economic extortion and political brinkmanship are good politics. By threatening to tank the U.S. economy, Republicans forced President Obama to make significant cuts to federal spending. “What we did learn is this,” then Senate Majority Leader Mitch McConnell said at the time. “[The economy’s] a hostage that’s worth ransoming.”
Today, as we face another debt-ceiling crisis, the GOP is at it again. Emboldened by the Congressional Freedom Caucus, Majority Leader Kevin McCarthy is trying to extract major concessions from President Biden. To raise the $31.4 trillion debt ceiling, Republicans are demanding caps on federal spending, work requirements for anti-poverty assistance programs, including SNAP and TANF, and cuts to federal programs, including a recently approved round of funding for the IRS meant to crack down on high-income tax evaders; those uncollected revenues will likely increase the deficit by nearly $500 billion over the next ten years. (McCarthy’s push to make the Trump-era tax cut permanent would similarly increase the deficit by an additional $3.5 trillion over that same period.) If these demands aren’t met, McCarthy and his caucus say they will let the country default, which would precipitate economic and financial catastrophe. It would disrupt financial markets around the world and effectively shut down the U.S. government. Monthly Social Security payments, which benefit about 70 million people—or one in five Americans—would stop. An estimated 8 million people could lose their jobs. Retirement accounts would be devastated, and the economy, still recovering from the pandemic, would fall into recession.