The U.S. economy could cave in under a “mountain of debt” if Republican lawmakers “blink first” and agree to raise the government debt ceiling without taking concrete steps to reduce the ballooning deficit, a top economic reporter told Newsmax.TV.
Stephen Moore, senior economics correspondent for The Wall Street Journal, said members of Congress and the American people need to realize the seriousness of the potential crisis as an Aug. 2 deadline looms for the government to raise its debt limit or default on its obligations.
“I think the first thing people need to understand is this is not a fire drill — this is a real financial emergency,” Moore said.
His comments came as credit ratings agency Moody’s said Thursday that it may cut the United States’ top-notch credit rating if lawmakers don’t make serious progress in their negotiations by mid-July.
The U.S. government does need to raise the limit on the amount of money it can borrow, Moore said, adding the warning that it also must halt its runaway spending.
The government is laboring “under a mountain of debt that could collapse the U.S. economy,” he told Newsmax.TV.
The Obama administration wants to raise the debt ceiling without first accepting that it will have to reduce spending by significant amounts, he said.
“I think the White House has this completely wrong,” Moore said. “The Republicans are saying we are not going to let you have the increase in the debt until you get this spending under control.”
“If Republicans fold on this one, which I don’t think they are going to do, but if they blink first . . . that’s what put America at risk of a financial crisis and a potential run on the dollar and a run on U.S. bonds.”
Moore said he approves of Republican House Speaker John Boehner’s call to cut spending by every dollar the debt limit is raised. “That’s a good way of framing the issue,” he said, adding, “The real question is, how much is Obama willing to cut the budget?”
And he warned that the government needs to begin budgetary reform — and maybe even adopt a balanced-budget amendment — to avoid future crises. The United States won’t be able to maintain its position as the global economic leader if it doesn’t fix the problem, he said.
“China owns more of our debt than any other country,” Moore said. “That puts us in a precarious position as we try to compete with that emerging economy.”