Congress to hear consequences of debt ceiling showdown

The Congressional Joint Economic Committee is set to hold a hearing Wednesday afternoon  in Washington on the economic consequences of another battle to raise the debt ceiling.

Moody’s Analytics Chief Economist Mark Zandi will testify at the hearing.  Zandi said the nation is still feeling the effects of the last debt ceiling battle, which caused stock prices to fall 10 to 15 percent in August of 2011 and led to a downgrading of the nation’s credit rating.

“It certainly hurt the recovery and is one reason why the recovery to this day is not fully engaged,” Zandi said. “We’re not off and running yet in part because of the brinksmanship over that showdown and all of the other budget battles that have occurred since then.”

The nation is projected to hit its borrowing limit about a month from now. Some Republicans want to use the debt ceiling deadline to negotiate a delay in the implementation of the Affordable Care Act.  But President Obama has said he will not negotiate over the debt ceiling.

Zandi said a default would cause major economic problems.

“Stock prices would fall,” said Zandi. “Bond yields would rise. The dollar would probably fall in value. I think it would undermine consumer-business  confidence pretty quickly and ultimately it would lead to another recession.”

Minnesota DFL Sen. Amy Klobuchar is vice chair of the 20-member Joint Economic Committee which is comprised equally of Democrats and Republicans from the Senate and House of Representatives.