'Boom': How Republicans could trigger a 'global financial catastrophe' if they retake Congress

On October 7, the U.S. Bureau of Labor Statistics (BLS) reported that the United States’ unemployment rate had fallen to 3.5 percent. The U.S., during the Biden era, has experienced some of its lowest unemployment rates in over half a century; that’s the good news. But the bad news is that the U.S. has also been experiencing its worst inflation since the early 1980s. Even Dollar Tree raised most of its prices by 25 percent.

Republican candidates, in the 2022 midterms, have been blaming President Joe Biden for inflation —although, truth be told, inflation is a global problem that has been aggravated by the COVID-19 pandemic. GOP strategists are hoping that voters, angry over inflation, will also blame Biden and take out their frustration on Democratic candidates.

Washington Post opinion writer Catherine Rampell, in her October 18 column, poses the question: How will Republicans handle the economy if they achieve a majority in the U.S. House of Representatives and/or the U.S. Senate in the midterms? Senate Minority Leader Mitch McConnell has expressed confidence that Republicans will likely “flip” the House, but he considers the Senate a toss-up.

READ MORE: 'The elephant in the room': Top Fed official says corporate price hikes are fueling inflation

“After refusing for months to divulge what they’d do if they regained control of Congress, Republicans have finally revealed some of their economic agenda,” Rampell explains. “Unfortunately, it might involve causing a global financial crisis, based on recent interviews with some GOP congressmen.”

The Republican Party, Rampell notes, “has not said how it would tackle inflation or other major economic challenges, including a recession.” But she adds that House Minority Leader Kevin McCarthy and other Republicans “have recently backed proposals to make the 2017 Trump tax cuts permanent, as well as to extend or expand several other corporate tax breaks.”

“The scariest part of the recently disclosed GOP economic agenda, however, has largely gone under the radar,” Rampell observes. “It’s the plan to hold the debt ceiling hostage next year, which could easily precipitate a global financial catastrophe. Republicans have withheld their support from raising the debt limit before, usually framing their hostage-taking as a commitment to fiscal restraint.”

Rampell continues, “But the debt ceiling has nothing to do with new spending; rather, it’s a somewhat arbitrary statutory cap on how much the government can borrow to pay off bills that it has already incurred, through tax and spending decisions that Congress has already made. Refusing to raise the debt limit is like going to a restaurant, ordering the lobster and a $500 bottle of wine, and then declaring yourself financially responsible because you skipped out on the check.”

READ MORE: Robert Reich debunks inflation myths

Rampell warns that if “lawmakers” default on the United States’ debt obligations, they “might accidentally blow up every other financial market on Earth, too.”

“That’s because U.S. debt is now viewed as the safest of safe assets,” Rampell explains. “Virtually all other assets around the world are benchmarked against U.S. Treasury securities. If we default on our debt obligations — or even come close to default — that raises the question of the riskiness of everything else investors buy and can send shockwaves of panic through every other market. Boom, financial crisis.”

READ MORE: Saying that spending hurts the economy is toxic and false