Eleven U.S. state treasurers and the comptrollers of Maryland and New York City have sent a letter to House Speaker Kevin McCarthy demanding the House of Representatives vote to increase the debt limit to prevent “catastrophic consequences” they say would damage pension funds, 401(k) plans and other retirement and educational savings vehicles.
In addition to the Maryland and NYC comptrollers, the letter was signed by the state treasurers of Colorado, Connecticut, Delaware, Illinois, Maine, Massachusetts, Nevada, Oregon, Rhode Island, Vermont and Washington.
The letter outlines their concerns that the federal government will be forced to default on its debt, which hit the current limit of $31.4 trillion last week. The Treasury Department has taken “extraordinary measures” to make sure the government can meet its financial obligations, but those will likely only work until June. If a default happens, the signatories say, “the value of portfolios invested across asset classes would decrease significantly.”
They also say a default would increase mortgage rates and automobile loan rates and increase the cost of personal loans, thus “hurting any American who needs access to finance to manage a health shock.” Additionally, the signatories say the cost of credit-card debt would increase, “crushing the millions of Americans who depend on access to affordable finance to manage their liquidity from paycheck to paycheck.”
The letter states that allowing a default would be a negligence of the duty of Congress to uphold the U.S. Constitution, citing Section 4 of the 14th Amendment, which addresses “the duty to ensure the validity of America’s public debt.”
Section 4 of the 14th amendment, passed in 1868 during the period of Reconstruction, states in part that “The validity of the public debut of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.” [Source]
The letter states that, “in simpler terms, putting the creditworthiness of our republic at risk serves the interests of America’s rivals on the world stage at precisely the wrong moment.” The signatories say that the cost of every imported good would increase, and “the balance of power between the United States, China, and Russia on the geopolitical stage would be altered drastically.”
The treasurers and comptrollers told McCarthy that representatives’ oath to defend the Constitution against foreign enemies “obligates you and your colleagues to put America’s national security interests before partisan differences when it comes to protecting America’s reputation of creditworthiness.”
The letter concludes by saying, “We urge you to honor your duty as outlined in the Constitution and act immediately to ensure the validity of the public debt and thus our national security and prosperity.”
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