As federal brinksmanship continues over the country’s debt limit, state officials are trying to keep nerves calm.
Federal officials have warned the country could start defaulting on its debt as soon as June 1 if Congress doesn’t authorize more borrowing. House Republicans have sought to leverage their slim majority for spending limits and rein in unspent COVID relief money, while national Democrats haggle over what those caps would mean.
Meanwhile, some of Colorado’s top Democrats in Washington, D.C., have likened the fight to a “manufactured crisis” and “holding guns at each other’s heads,” as U.S. Rep. Joe Neguse and Sen. John Hickenlooper, respectively, characterized the issue recently. Sen. Michael Bennet described the potential of a “horrible self-inflicted wound” that could include higher interest rates for homes and cars if there’s a default on debt payments over a fight with a political party that’s supported deficit spending for tax cuts.
But at the state level, the fight seems to represent more smoke than fire, even if Congressional leaders breach that foreboding deadline without a resolution. Colorado Treasurer Dave Young put it simply: Coloradans’ tax dollars are safe.
“We’re definitively not concerned about our ability to meet our obligations as a state,” Young, a recently re-elected Democrat, said.
Young touted a conservative financial portfolio and a team that’s watching the markets, along with enough money to handle the state’s obligations.
The federal threat of default isn’t the same as someone not being able to pay their bills, Young said. Instead, it’s a political fight about spending authority, he said. It becomes more dire if the fight drags on.
If the federal fight does drag on, the governor’s office is likewise not concerned about the federal government clawing back money from the states. Colorado has budgeted 100% of the federal money tabbed for COVID relief, spokesperson Elizabeth Kosar said.
She credited the money for helping position Colorado for a strong economic recovery from the pandemic downturn and took a shot at Congressional Republicans for ginning up economic uncertainty.
“Coloradans don’t deserve to have their hard work and economic security devastated by petty dysfunction in Washington,” Kosar said. “Congressional Republicans must stop squabbling and come to a swift resolution on the debt ceiling.”
Colorado’s Republican delegation to Congress has been consistent in voting against debt ceiling increases, and none more so than U.S. Rep. Ken Buck, of Windsor. Buck voted against raising the debt ceiling every time it crossed his desk, including when fellow Republicans asked for the increase — including as the sole member of the GOP delegation to join the state’s Democrats in opposing a 2018 increase.
For this most recent fight, a spokesperson for Buck cited a recent appearance on CNN where the congressman blasted the Republican and Democratic debt ceiling proposals as “bipartisan bankruptcy” for how much debt they’d add.
“We’re going to default, whether it’s in June or it’s in 10 years,” Buck said. “This country needs to change course.”
Buck said he wasn’t advocating for a national default over the debt ceiling, but also that creditors know this is a political fight — not a serious shirking or inability to pay the country’s obligations.
For similar reasons, Metropolitan State University of Denver economics professor Kishore Kulkarni had a simple answer to if typical Coloradans should worry about a default: “Not at all.”
“Nothing is going to stop,” Kulkarni said. “If it does stop, it’s going to be non-emergency services.”
The country’s leaders have faced these impasses before, he noted. Kulkarni predicted a failure to reach a deal here could again lead to a partial government shutdown until federal leaders reach some kind of deal.
“History repeats itself. We’ll get to June 1, and Congress will pass a law to increase the debt limit,” Kulkarni said. If the Democrat-held White House and Republican-controlled House of Representatives truly dig in, there may be a few days or a week of shutdown, but “by that week, Congress will pass the bill and they’ll have passed the bill they should have earlier.”
The United States is simply too economically powerful and too stable to truly default over this, he said. The treasury bonds are in too high of demand. The ratio of national debt to gross domestic product is something to keep an eye on, he said, but that’s not this issue.
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