McGovern: Municipal projects could suffer under debt ceiling
|Published: 01-23-2023 5:22 PM
Speaking in response to news that U.S. Treasury Secretary Janet Yellen will need to take “extraordinary measures” to prevent a default on the nation’s debt should lawmakers fail to increase or suspend the federal debt ceiling, U.S. Rep. Jim McGovern warns of how breaching the $31.4 trillion debt limit would harm local communities.
He noted in an interview that “breaching the debt ceiling is like stopping payments on your house or your credit card or your car. It would result in a loss of the ‘full faith and credit’ of the United States government, which has never happened before — never. So, it would be catastrophic. If we default on our debt, that means the government stops paying our bills.”
That, said the Worcester Democrat, would not only impact individuals and families dependent on federal programs, but cities and towns nationwide. Municipalities, he said, are not just dependent on transfers from the federal government, but on federal credit worthiness, since federal interest rates are thought of as setting the bar against which all other governments borrow.
“So a debt default would hurt municipalities in two ways,” he said. “They likely wouldn’t receive timely and/or complete funding for their projects from federal programs designed to provide that support. And then their own borrowing costs would also likely increase as interest rates skyrocket well, well, well beyond where they are right now.”
Trying to provide some perspective, McGovern added, “Things might get dicey even if we might not get to the point of breaching the debt ceiling. In 2011, we came close to a catastrophe. The Government Accountability Office estimated that that debt ceiling showdown cost taxpayers something like $1.3 billion in that fiscal year alone, and the credit agency S&P (Standard & Poor’s) downgraded America’s credit rating for the first time ever. So economists are warning us an actual breach would be even worse than that. Playing this game of Russian roulette — getting us right up to the edge — that’s damaging for our economy as well.”
Asked if the Biden administration should make any concessions to Republican leaders in the House of Representatives who are looking for commitments on future spending, McGovern replied with a firm “no.”
“The administration has made it perfectly clear that this is not negotiable, this should not be politicized, this should not be weaponized,” he said. “Look, I voted to increase the debt ceiling when Donald Trump was president. I hated his spending priorities; I disagreed strongly with his tax cut, which added $2 trillion to the debt. But, you know what, we accumulated those bills; so it’s irresponsible to say we’re not going to honor paying those bills and create an economic crisis.
“This is not a negotiable thing. If you don’t like our spending priorities, vote against the spending. That’s why I voted against the tax cut that benefited billionaires and big corporations,” McGovern continued. “Those were not my values. But once you’ve accumulated the bills, no matter who’s president, you can’t say, ‘I’m not going to pay my bills.’ You can’t just walk away, because the consequences are devastating.”
If the debt ceiling isn’t dealt with, McGovern stressed the financial impact that would be felt by cities and towns in Massachusetts and nationwide.
“If you talk to the town manager in Athol or Orange, or any other community in North Quabbin or statewide, they’ll all tell you this would be very, very harmful,” he said. “Even all the monies that have been obligated through the infrastructure bill and other bills that benefit local communities directly — that money could be put in jeopardy as well.”
Still, McGovern remains relatively optimistic that, should House Speaker Kevin McCarthy bring a “clean” debt ceiling bill to the floor, enough Republicans can be found to support raising the ceiling and avoid default. The GOP’s majority in the House is so slim that only five Republicans would be needed to support such a bill for it to pass.
“It’s the right thing to do,” McGovern concluded. “It’s the responsible thing to do. I may not agree with everything we have decided to spend on, but the bottom line is that’s past tense. We need to meet our obligations.”Greg Vine can be reached at firstname.lastname@example.org.