Chairman Yarmuth’s Opening Statement at Hearing on Why Congress Needs to Abolish the Debt Limit
Washington, D.C.— Today, Kentucky Congressman John Yarmuth, Chair of the House Budget Committee, gave the following opening statement at today’s hearing on Why Congress Needs to Abolish the Debt Limit. Remarks as prepared are below:
We’ve made remarkable strides to heal our economy in 2021, with the fastest GDP growth in nearly four decades, the most jobs created in a single year ever, and unemployment down to 4 percent – more than three years ahead of projections. And we recently received a CBO report that showed record wage growth and increased consumer purchasing power. I’d like to thank Ranking Member Smith for requesting this enlightening report which also found that wage growth is in fact outpacing inflation and I'd like to submit it into the record now.
Make no mistake – these gains were not inevitable. Thanks to the American Rescue Plan and President Biden’s and Congressional Democrats’ economic agenda, our recovery is beating projections and setting records. We have made tremendous progress in a short period of time, but there’s still more work to be done.
Elevated prices – while temporary – are a serious issue. That’s why we have passed legislation to fix supply chain bottlenecks, lower costs for families, revitalize American innovation and manufacturing, and create good-paying jobs here in America. The investments in the Bipartisan Infrastructure Bill are quickly being rolled out to every state across the country, and soon we will enact the America COMPETES Act to get our economy fully firing on all cylinders.
However, there is a problem. The debt ceiling now plays an outsized role in our politics and Congressional deliberations – something that was never intended. This century-old law was created to make borrowing easier, not harder. Its misuse has already jeopardized our ongoing recovery once, and now threatens the future of our economy and the American people. We will get into the details of why it needs to be abolished during this hearing, but because I cannot think of another provision of budget law that has been as misused, misunderstood, and misrepresented as much as the debt limit, I want to lay down the facts right away.
The debt ceiling is not the amount we can spend. It is not like the limit on credit card, an analogy we hear a lot.
The debt limit is the amount we already owe. It is the bill for previous spending and tax decisions made by Congress.
You cannot reduce the national debt by failing to raise the debt ceiling.
You will default on the full faith and credit of the United States by failing to raise the debt ceiling, which would be cataclysmic for our economy and American households.
The debt ceiling has been raised to pay for the actions of both Democratic and Republican Congresses. I’ll show you an example...
Republicans enacted massive tax cuts for big corporations and the rich in 2017. Congress has needed to raise the debt limit every year since, and will need to for several more years, just to cover the growing debt from this tax giveaway. So even if Congress did not spend a single additional dime after President Biden was elected – no COVID aid, no infrastructure bill, nothing – we would still need to raise the debt ceiling to cover Republicans’ deficit-ballooning and regressive tax policy.
Clearly, the only real role the debt ceiling now plays is a chip to be exploited for political gain. But there is a real human cost to this political gamesmanship. Every threat of default comes with the risk of actually defaulting. And in a closely divided Congress, with Members who have openly called for destroying the full faith and credit of the United States, that is a real risk we can no longer afford.
A full breach of the debt limit would be catastrophic. The immediate fallout would have severe, widespread, and painful consequences for the American people and our economic and national security.
Treasury would be unable to fund Social Security, Medicaid, nutrition benefits, military salaries, law enforcement, unemployment insurance, and more. Americans would be forced to go without these vital supports until Congress managed to lift this imaginary ceiling.
A breach would also cause immediate financial market chaos, which would likely spread around the world. This would lead to higher interest rates and make consumer products, like car loans and mortgages, more expensive – hurting American families.
It would also likely threaten our status as the global reserve currency and create an opening for a global competitor, like China, to step in and take our place at the top of the global economy. Again, Americans would be forced to pay the price of Congress’s failure with a weakened US Dollar and higher costs.
In Congress, in this environment, and as long as the debt limit remains in place, there is a direct threat to our entire economy – and Congress is becoming less and less capable of defusing it.
It’s time to abolish the debt ceiling. I look forward to hearing from our panel of witnesses who will share their expert analysis and first-hand experience with the costs and risks of this outdated law.
# # #