According to an analysis by Moody’s Analytics Chief Economist Mark Zandi, if Congress fails to raise the debt ceiling and the U.S. is unable to pay its debts, the country could fall into another recession. He believes upwards of 6 million jobs could be lost, $15 trillion in household wealth could be erased and the unemployment rate could double.
Bill Samuel, AFL-CIO Director of Government Affairs, joined America’s Work Force Union Podcast to discuss why he thinks Congress will raise the debt ceiling. He also discussed the $3.5 trillion budget reconciliation bill as well as the $1 trillion bipartisan infrastructure bill and why both bills have a high likelihood of eventually passing.
Will the nation default on its debts?
The deadline for the debt ceiling is sometime in October, though the treasury has some degree of wiggle room. The debt ceiling works like a credit card — it needs to be raised in order to not default on the debt and still be able to pay off the bill, Samuel said. Much of the debt was raised by the tax cuts enacted by the Trump Administration, though the CARES Act also contributed.
Samuel is confident Democrats and Republicans will eventually agree to a deal — though there may be a brief shutdown as both sides negotiate. If there is a government shutdown, Samuel thinks Republicans will largely get the blame.
People understand the Republicans are the anti-government party. Republicans always make the debt ceiling an issue when Democrats control the White House, and they usually suffer in the polls as a result, he said.
Despite common misconceptions, the nation’s debt generally goes down during Democratic administrations and spikes under Republicans, Samuel pointed out. Clinton balanced the budget, the debt went down under Obama and Samuel suspects it will also go down during President Biden’s term. Under George W. Bush and Trump, the debt spiked.
Democrats historical opportunity to achieve Biden’s Build Back Better plan
The Republicans are using the debt ceiling to gain leverage over the $3.5 trillion reconciliation bill, though much of that bill will be paid for by raising taxes on the ultra-wealthy and corporations, Samuel said.
The reconciliation bill includes much in the social safety net arena — it would provide money for education, childcare and housing, as well as invest in jobs in renewable energy. It also includes provisions from the Rich Trumka PRO Act that dictate fines for labor law violations — $50,000 per violation and $100,000 for repeat offenders. Fines would be levied not only against corporations, but corporate executives as well. That is highly significant, Samuel said.
A reconciliation bill cannot be blocked by the filibuster and would only need a 50-vote majority to pass. However, as a reconciliation bill, it can only include budgetary issues that raise or spend money. A recent push to include citizenship for essential workers, DACA children and other immigrants was recently rejected by the Parliamentarian.
The $1 trillion infrastructure bill is currently being held up in the U.S. House of Representatives, though a vote is expected next week. Some Progressive Democrats may withhold support in an effort to see the reconciliation bill pass. Many Republicans in the House will oppose the bill simply as an effort to see President Biden fail, Samuel said.
Nevertheless, he is confident both bills will pass. They are too important and too popular with the American people, including Republican voters. Democrats have a historical opportunity to pass both pieces of legislation because they hold nominal control of the legislative and executive branches. It is an opportunity they cannot pass up, Samuel added.
He is less confident the Freedom to Vote Act will pass, though he remains optimistic. The bill, which creates national standards for drop boxes, early voting and voting rights, will likely go to the floor of the U.S. Senate next month.