Becoming a nurse amounted to baptism by fire for Patrick Umeibe. The registered nurse entered the profession in March 2020 — just as COVID-19 officially hit. He has been juggling hefty patient loads and long hours ever since.
Three years in, “I still have charcoal burns on my arm,” the Atlanta registered nurse (RN) quipped. The pandemic and demand for nurses fast-tracked his career. He became a traveling nurse after a year in the field. Normally it takes two years.
Traveling, or contract, nurses are not attached to a particular hospital and work temporarily at various locations.
In Augusta, nurses at the Charlie Norwood Department of Veterans Affairs Medical Center also are logging long hours, including mandatory overtime, and increasingly taking on more patients because there are not enough nurses.
“They’re tired,” said Irma Westmoreland, a registered nurse at the VA Hospital who teaches nurses how to use the hospital’s computerized charting and documentation system. The hospital also is struggling to keep nurses. It hired 23 nurses between January and March of this year. During that same time, 22 nurses — including two new hires — left.
“It is really exhausting for nurses right now. Workloads have gotten heavier. Every service has gotten leaner and leaner,” Westmoreland said. An RN since 1986, she has worked in about every area of nursing: the intensive care unit, emergency room and acute care.
“We had a lot more nurses and things for our patients [back then] than we have right now.”
Welcome to nursing, post-COVID.
While the urgency of the pandemic appears to have subsided, the nursing shortage and its accompanying challenges haven’t. Georgia nursing officials, schools and hospitals are trying to address the shortage with signing bonuses and school-to-hospital partnerships.
Georgia’s nursing shortage hasn’t escaped state lawmakers. Health and human services is the second largest expense for the state, accounting for about 24%, or $7.8 billion, of the state’s $32.4 billion fiscal year 2024 budget. Gov. Brian Kemp last week signed legislation that includes funding for several bills passed during this legislative session to help ease financial burdens for nurses and nursing school instructors in an effort to attract and keep nurses.
“We do need more nurses. The pandemic really pointed that out. We were able to put money in the budget,” State Rep. Butch Parrish, R-Swainsboro, told State Affairs. Parrish chaired the Special Committee on Health Care, formed this past session to coordinate all legislative efforts in the House to help address health care issues.
Georgia is projected to have the sixth-worst shortage of registered nurses in the country by 2030, according to the Bureau of Health Workforce.
More than 100,000 registered nurses nationwide were estimated to have left the field during the pandemic, according to the National Council of State Boards of Nursing. Another 800,000 RNs are expected to leave over the next five years. And for the first time in 20 years, enrollment in entry-level baccalaureate nursing programs fell 1.4% last year, according to the American Association of Colleges of Nursing, raising concerns over future staffing and patient care and safety.
Here in Georgia, there are 141,117 actively-licensed nurses, according to the Georgia Board of Health Care Workforce’s nursing data. That data includes RNs, nurse practitioners, licensed practical nurses and others. Nine in 10 nurses in the state are women.
Meanwhile, the state’s population is aging. So is the nursing field. The average age of a Georgia nurse is 48. The head of one nurses’ group attributed the nursing exodus and ongoing shortage to “stress and the burnout from the pandemic.”
“I've talked with some [nurses who] were working two, three straight weeks of 12-hour shifts without a break,” Dina Hewett, president of the Georgia Nurses Association (GNA), told State Affairs. “Some nurses might be pulled into the critical care area where we've had a lot of these COVID patients because they had to be on the ventilator. So what we would consider a floor nurse might have to float into a critical care area, serving as an extra set of hands. So, they’re working in an area they're not familiar with. That adds a lot of stress and anxiety.”
Even though the COVID emergency has died down, nurses now are caring for patients who put off preventative care visits during the pandemic, or who were made to wait because of overflowing hospitals.
“[It’s those patients] who didn’t go get that mole checked who now have cancer, who didn’t get their followup (checkups) or surgeries, other things they needed because all of the care was being given to the urgent patient who was in the facility,” Westmoreland said.
Georgia’s patient-nurse ratio remains exhaustive. The state has about 7.31 nurses for every 1,000 people, the second-worst ratio in the country behind Utah, according to NurseJournal. The national average is 9.19. By comparison, South Dakota and the District of Columbia had the best ratio at 15.95 and 16.74, respectively.
Best-paying Georgia cities/counties for nurses (annual)
- Roswell: $80,760
- Gainesville: $73,820
- Dalton: $73,790
- Clarke County: $73,370
- Richmond County: $72,420
- Savannah: $71,450
- Rome: $70,320
- Albany: $69,670
- Warner Robins: $68,510
- Columbus: $68,330
While experts continue to mull over the national nursing shortage, Westmoreland said: “There really isn't a shortage of nurses. There's a shortage of nurses willing to work in the conditions at the bedside.”
In 2022, there were more than 1 million licensed registered nurses who were not working as RNs, according to National Nurses United (NNU), which analyzed data from the National Council of State Boards of Nursing and the U.S. Bureau of Labor Statistics. In Georgia, about 45,000 active RN licenses currently aren’t being used, according to NNU’s research.
This week during National Nurses Week, State Affairs spoke with several nurses in addition to Westmoreland who talked about working in environments where:
- Many hospital floors increasingly are now staffed with traveling nurses because hospitals don’t have enough or have lost regular staff nurses. Nurses are having to be responsible for more patients than usual. For example, an ICU nurse usually has two patients. However, during COVID, it was not unusual, the nurses said, for a nurse to end up with double the number of patients during a shift.
- Charge nurses who normally supervise a floor now have to take on patients along with their supervisory duties.
- Early-career nurses — those who’ve been in the field less than 10 years — report feeling burned out.
- Nurses are dealing with potentially dangerous patients experiencing alcohol withdrawal, dementia or other problems.
The nurses interviewed for this story said the patient load has improved. “It definitely is better but we still need staff ratios so we can keep nurses,” Westmoreland said, adding she’d like to see Congress pass legislation that would set national safety standards for nurse staffing in hospitals.
Currently, there are no federal mandates regulating the number of patients a registered nurse can care for at one time in U.S. hospitals. Two bills — S. 1113 and H.R. 2530 — introduced earlier this year would address those concerns, according to the nursing union National Nurses United.
Georgia at any given time is in need of thousands of nurses, with the greatest need being in metro Atlanta. Between June 2021 and May 2022, for example, there were more than 10,000 job postings for RNs in the Atlanta area at health facilities such as Piedmont, WellStar, Emory and Northstar, Hewett said.
Many of those jobs are being filled by traveling nurses like Umeibe and Alex Todd.
“I’ve definitely seen the shortage,” said 30-year-old Todd, who has worked at several metro Atlanta hospitals as well as a hospital in Columbus. During his most recent traveling assignment, he said he worked with quite a few other traveling nurses.
The increased presence of traveling nurses, also known as contract nurses, has created some tension, Hewett concedes.
Registered nurses in Georgia earn, on average, $75,380 a year or $36.24 an hour, 8% below the national annual average of $82,750, according to incrediblehealth.com. Travel nurses fare best when it comes to pay. They earn an estimated 30% more than registered nurses on average, according to NurseJournal.
“We’re trying to address that by improving the work environment and conditions for the hospital-employed nurses,” Hewett said.
The nursing shortage also means patients now have to wait longer for care. One exasperated Atlantan took to Twitter recently after his 86-year-old grandmother broke her hip and had to wait three days for surgery “due to lack of staff.”
Last week, Gov. Brian Kemp signed a dozen health care-related bills into law, including one that dispenses tougher punishments for those who harm health care professionals on the job. It also enables hospitals to create police forces. “The Safer Hospitals Act” became law May 2, less than 24 hours before a gunman killed one patient and injured four others in a medical office in midtown Atlanta.
GNA, the state’s largest professional group of registered nurses, called the new law “an important step toward ensuring nurses are able to practice free of the threat of violence.”
The nationwide shortage of nurses is expected to improve by 2035, according to national workforce estimates released in November. In fact, some states are projected to have an excess supply of RNs by then. Georgia, however, is expected to see a 21% shortage of RNs by then, the second-worst among the 10 states projected to have the largest deficit of nurses in 2035, according to the National Center for Health Workforce Analysis’ nurse workforce projections. The state of Washington is projected to have the worst shortage.
Steps are being taken to address Georgia’s nursing shortage and other challenges:
- Financial incentives. Georgia offers student loan repayments of up to $10,000 a year for physician assistants and advanced practice nurses working in underserved rural counties. Last week, Gov. Kemp signed SB 246, creating a loan repayment program for nursing instructors.
- Fast-track nursing partnerships. The University of North Georgia and Northeast Georgia Health System teamed up last year to create an accelerated, 15-month Bachelor of Science in Nursing program for students who already have a bachelor’s or master’s degree in other subjects. The program is expected to add 280 nurses to the workforce over the next five years, beyond the nurses UNG already trains.
- Artificial intelligence in the emergency room. Emory University’s Nell Hodgson Woodruff School of Nursing is using HAL model-5301, the world’s first AI-enabled patient simulator to train nurses. It can be connected to ventilators and monitors to simulate real hospital settings.
Despite the grueling challenges brought on by COVID and the nursing shortage, Umeibe and Westmoreland are undaunted.
Umeibe plans to get a master’s in nursing and wants to become a nurse practitioner. “For me, nursing has definitely been unexpected,” he said. “Getting a master’s will give me a little bit more stability.”
As for Westmoreland? “I could retire at any minute but I love what I do,” the 59-year-old said. “I've got a lot of years left to work. I'm going to be here for a long time.”
Want to know how many different kinds of nurses are in your county? Find out here.
You can reach Tammy Joyner on Twitter @lvjoyner or at [email protected]. Joyner is State Affairs senior investigative reporter in Georgia. A Georgia transplant, she has lived in the Peach State for nearly 30 years.
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Judicial circuits get $15 million more to pare down big case backlogs
Georgia courts are getting a $15 million injection to help combat case backlogs accumulated during the COVID-19 pandemic. The money will be used to update courtrooms with new audio-visual equipment, cameras, recording devices and other technology.
Nearly half of Georgia’s 50 judicial circuits are getting the new round of money, the second and final round of federal American Rescue Act (ARPA) grants slated to be distributed this year. Two of the 24 circuits awarded grants – Flint and Pataula – are first-time recipients. The rest of the money is going to circuits that applied and were approved for more money.
“The bulk of this round of distributions is to modernize courtrooms and things like that,” Bruce Shaw, a spokesman for the Judicial Council of Georgia/Administrative Office of the Courts, told State Affairs.
For example, according to their backlog response plans, 21 circuits plan to use the money to add newer audio-visual equipment. Approved as a new eligible expenditure by the committee starting this award cycle, over $12 million was requested and awarded to update audio-visual equipment.
Requests also included money for temporary personnel such as senior judges, judges to serve by designation, court clerks, prosecutors, security, investigators, victim support staff and court reporters. There were also requests for supplies, personnel education and training as well as money to rent temporary space to hold court.
“We look forward to the support and efficiencies the audio-visual equipment modernization will provide to move cases faster and without technical delays,” said Supreme Court of Georgia Chief Justice Michael Boggs, chairman of the Judicial Committee.
Why It Matters
Between March 2020 and June 2021, Georgia’s judiciary system operated under a statewide Judicial Emergency Order that placed limits on court operations to protect the health and safety of people working or coming into court during the pandemic. That led to a backlog of criminal and civil cases, especially those requiring jury trials to resolve.
In October 2021, Gov. Brian Kemp allocated $110 million in ARPA money to the state’s judicial branch to deal with the backlog, especially serious violent felonies.
The Judicial Council is administering $96 million of that money to eligible courts, prosecutors and related agencies. The remaining $14 million in ARPA money went to the Georgia Public Defender Council for grants to public defenders.
With this latest round of awards, 45 of Georgia’s 50 judicial circuits will have received grants since the program began on Jan. 1 , 2022.
Challenges still persist. In addition to the backlog of cases, Boggs said there’s a shortage of attorneys during his inaugural State of the Judiciary address in March. And some courts are in need of court reporters.
In addition to dealing with serious felony cases, COVID and court backlogs tied up many civil cases. For example, Atlantans Antonio Fleetwood’s and Lakiela Edwards’ wedding plans were on hold for nearly two years. The couple finally tied the knot in a special Valentine’s Day ceremony at the Fulton County Probate Court.
How successful has the ARPA program been in helping reduce the backlog in Georgia’s 50 judicial circuits? That’s hard to say. There is no statewide clearinghouse, Shaw said, that would give a clear picture of the progress. Or lack of it.
“It’s going to be different in each circuit,” he said. “So a statewide average would be difficult to come by right now.”
State Affairs checked in with Georgia’s 10th Judicial District, which handles civil and domestic cases for 21 counties in northeast Georgia. It has seven circuits and is the third-largest district in the state.
In the first few months of this year, the Augusta Judicial Circuit, the 10th District’s largest circuit, has seen its pending serious violent felonies drop by 37%, District Administrator Tracy J. BeMent told State Affairs.
Alcovy, another circuit in his district, “has done extremely well in prioritizing serious, violent felony trials this past year and has worked down their [cases] quite a bit,” BeMent said.
As of last August, the latest data available, “Alcovy had cleared out 54 serious felonies and was on track to complete almost 49 trial weeks for 2022 amongst their five judges,” Bement added.
In the Toombs circuit, clearance rates are low but they’re prioritizing backlog cases, BeMent said. The Western circuit in Athens continues to have a backlog “as they have a number of cases that have yet to be indicted,” he said.
More work remains to be done.
“The challenge continues to be making sure we have appropriate staff and that we’re fully staffed and that that staff is trained and ready to go,” BeMent said.
The ARPA money has helped add more personnel but it takes time for them to get up to speed, he noted.
So far, the district has received about $8 million in ARPA money, BeMent said, with another $3 million coming from this latest round of ARPA distributions.
Meanwhile, former President Jimmy Carter recognized The Judicial Council/AOC’s 50th anniversary this year in a Jan. 25 letter. The council was formed while Carter was Georgia governor. The ailing 39th president entered hospice on Feb. 17.
“Now the challenge is considering what is needed from all of you for the next 50 years,” Carter, 98, said in the letter. “What do future generations of judges, lawyers and citizenry need from their judicial branch? What does improving justice look like in the next decade? These are no small questions, but ones I know you will meet with the same spirit that has guided you through the past half-century.”
Have questions, comments or tips? Contact Tammy Joyner on Twitter @lvjoyner or at [email protected].
Top image: Inside the Nathan Deal Judicial Center in Atlanta (Credit: Judge Stephen Dillard)
$69.4 billion farm-to-table pipeline: ‘If you’re not at the table, you’re on the menu’
Tammy Joyner and photographer Brandon Franklin hit the road with the Georgia Legislative Black Caucus (GLBC) for the Black farms tour. There were so many great pictures, we decided to share the tour with you. Enjoy!
And check out our Q&A with Chairman Carl Gilliard and an agriculture perspective on Gov. Brian Kemp’s budget vetoes.
“Make the farm work and serve the community.” — Addis Bugg, Sr., Addis Farm
Joyner and Franklin traveled with the GLBC to several Black-owned farms, including Roberts Vineyard, Addis Bugg Farms, Paul Copeland Farms and Living Waters Farms. They concluded the tour with the “At the Table Roundtable” discussion event with Georgia farmers at Fort Valley State University.
Can you spot the bull?
Have questions, comments or tips? Contact Tammy Joyner on Twitter @lvjoyner or at [email protected].
Header image: John Deere combine at the state-of-the-art agricultural research facilities at Fort Valley State University. (Credit: Brandon Franklin)
All images and video by Brandon Franklin.
Read more on the ag industry by Tammy Joyner.
Q&A: Even the Energizer Bunny is no match for Carl Gilliard
State Rep. Carl Gilliard has been running at a fast clip for nearly four decades, juggling a ministry, making music and movies, writing books, feeding the hungry, hosting talk shows and performing community activism.
As a teenager, Gilliard founded a local rap group in Savannah to fight gun violence. By the time he was a student at Morris Brown College, the late civil rights activist the Rev. Hosea Williams was his mentor. His activism also put him in the sphere of other influential civil rights icons: the Revs. Joseph Lowery and Ralph Abernathy, and Coretta Scott King.
Gilliard later went on to become a minister himself as well as an author, radio show host and head of a multimedia group that produces documentaries on history. Gov. Brian Kemp appointed the state representative from Garden City to the Georgia Film Commission in 2019.
Gilliard sits on eight legislative committees, including appropriations, creative arts and entertainment, and transportation.
In January, Gilliard ascended to a critical leadership post in the Georgia General Assembly: chairman of the Georgia Legislative Black Caucus (GLBC), the largest caucus of Black lawmakers in the nation.
In that role, Gilliard is determined to get Black farmers solidly entrenched in Georgia’s $69.4 billion farm-to-table pipeline. “If you’re not at the table, you’re on the menu,” the 59-year-old is fond of saying.
Caucus member Sen. Gail Davenport, D-District 44, marveled at Gilliard’s energy. “I don’t know how he gets it all done. He’s busy,” she said. “He has led the caucus very well. He knows South Georgia very well and certainly here in the General Assembly, he has been an effective leader. He works to make sure the Senate understands the position of the House and the House understands the position of the Senate as far as the Democrats are concerned.”
As caucus chairman, Gilliard has made Black farmers and other Black businesses, access to credit, affordable housing and medicine top priorities.
But Black farmers are close to his heart. He recalled years ago when Georgia lawmakers gave millions of dollars to pecan farmers after tornado-ravaged storms damaged their pecan trees.
“We did a bill to give them money. Then we called a special session just to appropriate more money,” said Gilliard, who served on the Appropriations Committee at the time. “Unfortunately, Black farmers were not a part of [getting] that [money].”
State Affairs spoke to Gilliard about his role as chairman, what he intends to do to help Black farmers, and his other top priorities.
How do you see your role as chairman?
As chairman, I’m blessed to be able to walk in the leadership of 74 great senators and representatives from across the state. We represent the melting pot of Georgia.
What has been the biggest takeaway in your first five months as chairman?
Being able to hear from the members and their diverse communities. When we look at the big picture, we have more in common than not in common. That is the reason we did the GLBC rollout in reference to legislation because those are some of the things you hear in communities across the state.
You head the nation’s largest caucus of Black legislators. What are the economic and social issues impacting Black Georgians and how is the caucus poised to address those issues?
The needs of Black Georgians are just like what we went through when the recession hit. Everybody on Wall Street got bailed out while the people on Main Street got left out.
We are constantly playing catch-up. We’ve got to do more: continue education, start more businesses, be able to get a fair share of [state] contracts and be able to deliver services so that we can have generational wealth for future generations.
Black Georgians also have to be included in the top levels of [Georgia’s] $4.4 billion film industry. So the focus is to look at legislation that gives inclusion to levels of opportunity in film.
We must also try to get more Blacks into the business side of film, in reference to the creative opportunities of making and producing films and soundtracks.
Some people feel now that we’re in a post-racial era, there’s no need for a separate caucus for Black legislators. Thoughts?
There will always be a need for a Black caucus in Georgia. There’s always been a need since 1868 with “The Original 33” senators and state representatives who were [initially] not allowed to take office. Fourteen of them were lynched and killed. They had to go through unscrupulous challenges. We still face those challenges when we are in the minority, and we’re trying to get legislation passed for the people who are still facing obstacles. Across the nation, there will always be a need for Black caucuses because of the consensus of the people we represent. We represent over 3 million [Black] people in Georgia.
Who are Georgia’s Black farmers?
When people think about farmers, 99% of the time they just think about those who grow. But you have farmers who have land. You have farmers who have cattle. We even have farmers today [whose business ranges from] cattle to produce to hemp. They just don’t get an opportunity to [publicly] share all that they produce.
Having the resources to upgrade and getting the materials and equipment they need — that’s the biggest need.
They don’t have the workers to help with these farms. And they don’t have the money to hire. They’re just trying to survive. So there has to be a connection to workforce development to help them. The state has workforce development programs that may be able to help some of these farmers. Here again, it’s about us being innovative enough to use what we have to help them.
Have you talked to Agriculture Commissioner Tyler Harper about your concerns?
Well, we’re going to be talking with the new agriculture commissioner. We’ll give him a chance to get in the door [of his new job] first. We’re giving him the benefit of the doubt to say, ‘Let’s meet.’ This will better Georgia because agriculture is the No. 1 entity in Georgia.
What’s the caucus’ next step as it relates to Black farmers?
We’ll push for a bill that would create the Georgia Racial Equity in Agriculture Act. It would establish an Office of Equity in Agriculture, provide training for farmers of color and other historically-underserved farmers and ensure equal distribution of federal aid from the Inflation Reduction Act and Promoting Precision Agriculture Act. And we are gathering information to establish a Georgia Black farmers directory to list all of the farmers who are currently in the state to get them support from consumers as well.
Aside from Black farmers, what are the caucus’ other priorities?
Health care for all Georgians. Looking at the criminal justice system and people who are unfairly on probation for long periods of time when they have a misdemeanor. Some people are still on probation after 20 years. We’ve got to look at different elements of the criminal justice system to see what is fair and what needs to be updated.
We need to make sure we have a fair shake in the minority participation of state contracts. If we’re 30% of the population, then those contracts need to look like the representation of the 30% of minorities in Georgia.
What are some of the events the caucus has planned?
On June 7, we have the Young Leaders Conference at the Capitol for high school and college students. The caucus’ annual conference will be in Savannah July 21 to 23 and we have several for-the-people rallies coming up in Athens, Augusta, Macon and Valdosta. Lastly, we have a Black university tour the first week of September at several Black universities in Georgia.
The Carl Wayne Gilliard File
- Title: Chairman of the Georgia Legislative Black Caucus; Democratic state representative, District 162 (Savannah)
- Age: 59
- Hometown: Savannah
- Residence: Garden City
- Occupation: Pastor of Family Life Center in Garden City which operates the Empowerment Center, a program that “gets people on their feet and helps them with everything from housing to credit.” He also has a nonprofit, Feed the Hungry, that has distributed about 1.5 million servings of food in 10 cities in Georgia and four in South Carolina.
- Education: Graduate of Morris Brown College; Doctrine of Divinity from the New Generation School of Seminary.
- Career: While in college, worked as the national youth coordinator for then-presidential candidate the Rev. Jesse Jackson. Became a minister in 1995. Sworn in to the Georgia House of Representatives on May 5, 2016.
- Accomplishments: In the mid-1980s, he founded the Savannah-based rap group Candy Love to combat gun violence. Creator of four national gospel plays. Host of a radio talk show in Savannah as well as gospel TV shows. Founder of Feed the Hungry Inc. in 2009. In 2012, he launched a multimedia communication company called Urban Media and the Gilliard Foundation, which produce documentaries and television specials on history. Author of an upcoming book “Power of the Pen.”
- Family: Married father of four daughters
- What do you do to relax: Watch sports. I am a writer and a filmmaker who does documentaries.
- What’s your ultimate dream? Having a farm.
Have questions, comments or tips? Contact Tammy Joyner on Twitter @lvjoyner or at [email protected].
Header image: State Rep. Carl Gilliard touring Bugg Farm in Pine Mountain, GA. (Credit: Brandon Franklin)
A default on the country’s debt could cause ‘real and lasting’ damage
The nation’s politicians are considering a voluntary default on the country’s debt. Yes, “voluntary.” The nation’s elected leaders in Congress and the White House could end this today if they wanted. Unfortunately, they are choosing to engage in political brinkmanship in negotiations over the debt ceiling, potentially defaulting on the nation’s debt.
In a straightforward sense, the debt ceiling is created by enacting legislation in which Congress temporarily limits the degree to which federal government expenditures can exceed tax revenue. The shortfall is covered by issuing treasury bills, notes and bonds. On an annual basis, the difference is referred to as the deficit, while the accumulation of the yearly deficit is referred to as the national debt, which is now $31.5 trillion. It fundamentally means that the government needs to take in more tax revenue to pay its bills. The first debt ceiling was created by Congress in 1917, so this is a familiar thing.
The general timing of when the debt ceiling is hit can be forecasted with relatively high accuracy, so this problem is unsurprising. Congress had months and months to address this but instead chose to act like children pretending that some inevitable outcome and day of reckoning for irresponsible behavior is now somehow a surprise. The Treasury Department began using “extraordinary measures” back in January when the usual and customary flow of tax revenue was insufficient to pay the bills. The Treasury Department has some ability to create months of budgetary wiggle room through fiscal creativeness that mostly boils down to suspending the reinvestment of revenue generated in some federal government pension or caretaker accounts.
That wiggle room is now gone. The so-called X-date, when even the extraordinary measures fail to cover the bills coming due, is now estimated to be June 1. This date has been moved forward several months because tax revenue is running about 10% below that of the previous fiscal year. The reason is mainly attributable to the slowdown in capital gains tax revenue from realized gains in the stock and housing markets.
Should our elected representatives choose to voluntarily default on the nation’s debt because of their unwillingness to compromise on political dogma in the negotiations over the debt ceiling, well, let’s say bad things will happen. Extraordinarily bad things. Global financial markets will be shaken to their core. The interest rate on the 90-day Treasury bill is referred to as the risk-free rate of return because, under normal circumstances, the government will not go out of business in the next three months. A vast array of domestic and global interest rates is benchmarked to the risk-free rate of return established by the interest rate on short-term U.S. government debt. When that rate is no longer risk-free, everyone will pay higher interest rates on all borrowings, including credit cards, auto loans, mortgage rates, and multi-billion dollar capital investments like those in Georgia’s budding electric vehicle industry.
At a minimum, the federal government would need to decide which bills coming due would be paid, thereby creating a class of winners and losers regarding who gets paid and when. Fundamentally, the tradeoff is between trying to calm financial markets by paying the interest due on debt versus mitigating the severity of the default-induced recession. The optics are not good if Treasury makes winners out of bondholders, and 25% of that debt is held overseas, and makes losers out of older people relying on their Social Security payment.
In the long run, when a government defaults on its debt, it faces much higher interest rates in the future when borrowing again in global capital markets. Greece in 2012 and 2015 is a case in point. When Greece effectively defaulted, investors demanded higher interest rates to compensate for the increased risk on Greek bonds. The 10-year rate on Greek bonds skyrocketed to 35% from about 4% and remained elevated for eight to nine years.
Hopefully, our elected representatives in Washington, D.C., will acknowledge the real and lasting damage a default of the world’s largest debtor nation would cause now and in the future. We’ll be back at this in a few years when the next debt ceiling cap is again under siege.
Michael Toma, Ph.D., is the Fuller E. Callaway professor of economics in the Parker College of Business at Georgia Southern University in Savannah. He specializes in macroeconomics and regional economics and holds a Ph.D. in Economics from George Mason University in Fairfax, Virginia. He joined Armstrong State University in Savannah in 1997 and continues with Georgia Southern University today. He can be reached at [email protected].