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Debt Crisis Doomsday Report: Let’s Hope It’s Fiction

Chris Hildebrand contributed to this post. 

Fear is a powerful motivator. Attempting to harness this power, a report from the Committee for Economic Development (CED) grimly describes frightening, yet devastatingly plausible, scenarios to highlight the gravity and consequences of inaction on the current debt crisis.

Written by CED Senior Vice President and Director of Research Dr. Joe Minarik (also a member of BPC’s Debt Reduction Task Force), the report, entitled, “This Way Down to a Debt Crisis,” presents a series of “alternative futures” for the U.S. Each scenario outlines a series of political and economic actions (or in many cases, inactions) that produce varying degrees of success or failure with regards to national fiscal health.

Importantly, the “choose your own adventure” format is shockingly easy for the average American to imagine; it feels akin to watching a hit political drama unfold on TV, but with legitimately plausible events and very real consequences. As Minarik himself framed it, “the report shows the potentially dire consequences for typical citizens, including people who likely believe today that they are immune from any possible fallout from a debt crisis.” This accessibility helps Americans understand the difficult position that the country currently occupies: precariously teetering between economic disaster on one hand, and a carefully managed, responsible recovery on the other.

Consider one particular scenario presented by the report: imagine, for a moment, that U.S. Treasury bonds are suddenly downgraded by rating agencies (an outcome not too difficult to imagine), and a major U.S. bond auction fails in spectacular fashion. The nation is faced with a huge deficit and rising interest rates from the loss of its long-treasured privileged borrowing position as the safest investment in the world. The U.S. is quickly plunged into a “debtor’s death spiral,” with little hope of recovery. Families and politicians alike struggle to stay afloat with a newly recessed economy, the elimination of many crucial government safety net programs, and strict government austerity measures. The picture is vivid, but it certainly is not pretty.

In the alternative futures, the damage is done as each political party sticks to the partisan game, refusing to implement sound public policy as they struggle to avoid blame and keep power while the country crumbles around them. This reality has played out all too well in recent months, with the Gang of Six talks stagnating and continued bickering over the debt ceiling. With the recession lingering and the national debt still growing, This Way Down provides an important and timely counterpoint to the hollow partisan debates in Congress. Continued inaction will generate a nightmare eerily similar to the ones painted by Minarik – only this time, it won’t be fictional.

This Way Down is a much-needed reminder that alarm bells should be ringing in Washington. The American people will be looking to Congress and the president in the coming days not just for more debate, but rather for true leadership and serious, responsible action. Otherwise, the “adventure” may be chosen for us, and our economic fate could be sealed.

2011-07-01 00:00:00

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