Democrats Spell Out Debt Default Consequences

BY Quinn Bowman  July 14, 2011 at 2:07 PM EST

McConnell and Schumer debate

Senate Minority Leader Mitch McConnell speaks with Sen. Charles Schumer, D-N.Y., file photo

With no deal in sight as congressional leaders continue debt-limit talks at the White House Thursday, Senate Democrats are spelling out the dire consequences of a failure to reach an agreement and raise the debt ceiling.

Using two big graphs showing federal government revenue for August and the money allocated to be spent that month, Sen. Charles Schumer, D-N.Y., demonstrated that many vital services would have to be immediately cut if Congress does not raise the debt ceiling.

“Republican intransigence is pushing us toward a default, while many of them are claiming that the impact of a default would not be very significant,” Schumer said. Aside from the fact that it will cost the United States more to borrow money if the nation’s credit rating is downgraded, Schumer said the lack of money would force the Treasury Department to make difficult choices about where to spend money.

One of Schumer’s charts showed projected revenue for August at $172 billion while the other showed obligations of $307 billion. Highlighting different types of spending such as Social Security, defense spending and Medicare, an aide demonstrated how huge swaths of the government would have to go unfunded if the debt limit does not go up.

“If you’re going to fully pay Social Security, Medicare, our troops and interest on the debt, you don’t have anyone at border, anyone doing food inspections, anyone in the FAA towers. America would come to a grinding halt,” Schumer said.

While many Republicans have said the U.S. must raise the debt limit, there is pressure from Tea Party groups to oppose the increase. Republican presidential candidate and Minnesota Rep. Michele Bachmann has vowed to not vote to increase the debt limit under any circumstances.

A good example of the viewpoint that not raising the debt limit is a viable choice, look to Sen. Pat Toomey, R-Pa., who argued in this Wall Street Journal op-ed that if the Treasury Department paid interest payments on debt, the federal government would not default, but the government would be forced to make major spending cuts.

Schumer said he hoped Congress and the White House could still work toward a “grand bargain” deficit reduction deal, but said Senate Minority Leader Mitch McConnell’s plan for giving President Obama the authority to raise the debt limit could be viable if some changes are made.

He also blamed House Majority Leader Eric Cantor as the one bad actor in the negotiations.

“He is basically standing in the way, and it’s a shame,” Schumer said.

The next round of talks at the White House are scheduled to start at 4:15 p.m. Thursday.

For more on the consequences of hitting the debt ceiling, be sure to check out this interactive graphic.