Blame Republicans if your retirement accounts tumble

Check your retirement accounts now. Write down the value of your stock market investments. Then, if your total tails off or tanks during this period of debt-default brinkmanship, put the blame exactly where it belongs: on the Republicans in the US House of Representatives.

We as Americans tend to treat the standoff over the nation’s debt ceiling as just another pointless play produced by the national theater of the absurd that calls the Capitol its stage. We’ve watched the debt standoff multiple times before. It has always gotten resolved in the end, with little lasting damage done.

Maybe this time, too. But maybe not.

Treasury Secretary Janet Yellen warned on Monday that without congressional action to raise or suspend the debt limit, the United States could default on its obligations as soon as June 1.

If that happens, the consequences will cascade through the economy — cratering retirement investments as it does.

“I don’t think anyone should take the notion of defaults casually. There is no way to escape its consequences,” conservative economist Doug Holtz-Eakin, a former director of the Congressional Budget Office and now president of the American Action Forum, said in an interview. “If we default in a significant way and there is some durability to it, then that impairs treasuries, and that’s the foundation of the US financial system. That probably hurts you for a significant period of time.”

At Moody’s Analytics, chief economist Mark Zandi agrees, saying by e-mail that the effect of a default on retirement nest eggs “will be ugly,” adding that “just how ugly depends on the scenario that unfolds.”

When the Federal Reserve modeled a possible debt default in 2013, that analysis predicted it would trigger a mild recession, with several years of reduced gross domestic product growth and unemployment 1.3 percent to 1.7 percent higher than would otherwise have been the case.

Moody’s currently estimates that if this game of chicken results in a default that drags on for several months, the combined effect would see the stock market tumble by almost a fifth, wiping out $10 trillion in wealth in the short term. The drag on economic growth would still be felt a decade from now, according to that analysis.

A recent analysis by the center-left think tank Third Way estimated that a typical American approaching retirement would see a $20,000 loss in their retirement equities. (That assumes that an everyday American has 40 percent of retirement savings invested in stocks and suffers a loss of 22 percent — a midpoint between past estimates — resulting in an equities reduction of around 8.8 percent.)

It seems incredible that House Republicans would let that happen.

And yet, as their conditions for increasing federal borrowing authority, House hard-liners are making a series of hostage-taking demands, from repealing the recently passed climate package to reversing efforts to bolster the IRS to extending or imposing welfare and Medicaid work requirements to enacting substantial real-dollar discretionary-spending cuts.

So what makes this debt-limit crisis different from others we’ve endured? The power dynamic in the House.

Kevin McCarthy is a weak speaker. The long rounds of dealmaking he engaged in to acquire the post, which he finally obtained after 15 rounds of voting, has reduced his power to the point where it can’t really be said that he truly leads the House. Instead, he negotiates from a position of perpetual vulnerability with the Freedom Caucus, a group of far-right absolutists.

So what makes this debt-limit crisis different from others we’ve endured? The power dynamic in the House.

Now, let’s be clear. As a nation, we are currently spending substantially more than we can responsibly afford. Some combination of higher taxes and reduced spending is virtually inevitable in the long term.

The parties can and should fight about future budgets, which is to say, national priorities. Such debates are what politics is about.

Republicans can certainly contend that their slim victory in taking back the House gives them a mandate to restrain future federal spending. But it’s colossally irresponsible of them to use the threat of national default to try to leverage cuts in previously approved spending commitments.

So if this brinkmanship ends up decimating the retirement accounts of millions of Americans, they should direct their anger at the proper target.

That is, the reckless ideologues willing to run the American economy onto a retirement-rending reef to achieve their policy demands.