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Klobuchar: Debt ceiling default could send economy into "downward spiral"

Posted by: Corey Mitchell under Minnesota U.S. senators, Minnesota congressional, Democrats, Republicans Updated: September 19, 2013 - 9:35 AM

As House Republican leaders press forward with a government funding bill that would defund President Obama's health care law, U.S. Sen. Amy Klobuchar and colleagues vowed to fight the effort.

Klobuchar and U.S. Sens. Chuck Schumer of New York and Bob Casey of Pennsylvania hosted a news conference Wednesday to rebuke a planned Republican bill that would make defunding Obamacare a requirement for lifting the debt limit and funding government operations.

The House is scheduled to the vote on the bill Friday. Klobuchar said the political brinkmanship is a tired tactic that's played out too many times before.

The Republican gambit raises the stake in a fiscal fight that will shut down much of the government unless House and Senate leaders can agree on legislation to raise the debt ceiling and get it to the White House by Oct. 1.

The shutdown could limit access to consumer credit, disrupt financial markets and raise financing costs for businesses.

GOP leaders may have the votes to pass the bill in the House, but it faces almost certain defeat in the Democrat-controlled Senate, which is expected to strip the health care law-defunding language from the bill.

A panel of experts testifying before Klobuchar and other members of the Joint Economic Committee on Wednesday said that a government shutdown would seriously damage the nation's economy. Several of the witnesses also argued for significant cuts in government spending.

"The current budget battle should have little adverse effect on investors, consumers and businesspeople, provided it is resolved in time," said Mark Zandi, chief economist and co-founder of Moody's Analytics

"But policymakers should not take solace in this. If they botch it and the government shuts down or fails to meet all its obligations ... the economy will suffer serious harm."

Citing economic uncertainty sparked by the 2011 debt ceiling debate, a report released Wednesday by the committee made the case that even the threat of a delay in raising the debt ceiling could cause consumer confidence to plummet and interest rates to rise on credit cards and home mortgages.

"The consequences of this debt ceiling showdown could be even worse the second time around," Klobuchar said Wednesday.

Here's a look at the report:

JEC the Economic Costs of Debt-Ceiling Brinkmanship

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