McConnell: GOP Will Likely Take Debt Ceiling Hostage For Spending Cuts — Again

Republicans and Democrats agreed to increase the debt ceiling for three months at the end of January, but with another deadline approaching in May, the top Senate Republican is hinting that the GOP will again demand spending cuts in exchange for any increase.

That is par for the course for Republicans, who have repeatedly threatened to let the nation default on its obligations if President Obama and Senate Democrats don’t agree to cut spending, but this time, Senate Minority Leader Mitch McConnell (R-KY) said the GOP will likely demand cuts to America’s entitlement programs — Medicare, Medicaid, and Social Security — to agree to an increase in the borrowing limit, The Hill reports:

“Until we make our entitlement programs fit the demographics of our country, you can’t save America, you can’t save the healthcare system,” McConnell said. “There is no revenue solution, I would say to you.”

“We all anticipate that the president’s request of us to raise the debt ceiling, which we’ll probably do sometime this will generate another, hopefully, another discussion about solving the real problem,” he said.

Republicans continue to crow about entitlement reform, ignoring that Social Security is fully solvent for at least two decades, that Obama extended Medicare’s solvency by nine years as part of his sweeping healthcare law, and that at least one of the major reforms Republicans favor — raising the retirement age for Medicare enrollees — would do nothing to improve the program’s health. Meanwhile, the GOP refuses to actually put forth specific entitlement reform plans that would do anything other than end the programs as they exist today.

Using the debt ceiling to extract such cuts is an even less reasonable position, given the pain the GOP’s debt intransigence has already inflicted on the economy. The 2011 debt fight led to increased borrowing costs, hampered job growth for months, and created the automatic budget cuts that went into effect at the beginning of March — all of which burdened an economy that is still struggling to fully recover from the Great Recession. That brinksmanship has led leading policymakers like Federal Reserve Chairman Ben Bernanke, as well as a vast majority of economists, to call for the abolition of the statutory debt limit.

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Portman: Obama 'compelling' on debt ceiling, but spending cuts necessary

Sen. Rob Portman (R-Ohio) said Tuesday that while President Obama may have sounded "compelling" as he urged House Republicans to raise the debt ceiling, the president fundamentally misunderstood the need for dramatic budget change.

“It is a compelling message saying we need to pay the bills that we’ve racked up. But it misses the whole point," Portman told Fox News. 

The Ohio lawmaker went on to compare the $16.4 trillion debt ceiling to credit card debt, equating Obama's stated unwillingness to bargain over an extension to a free-spending teenager.

"Think about it in terms of a credit card," Portman said. "If you have a son or daughter who exceeds the limits, what do you do? The first thing you do is probably rip up the card. The second thing you do is say, ‘We need to change our spending habits.’ This is what the president won’t do.” At a press conference Monday, Obama said the threat of default was "irresponsible" and "absurd," demanding that the House GOP extend the debt ceiling separate of negotiations on a comprehensive debt deal.

“They will not collect a ransom in exchange for not crashing the American economy,” Obama said. “The full faith and credit of the United States of America is not a bargaining chip.”

But Portman said such a step could only be taken alongside spending cuts.

“Yes, we need to raise the debt limit at some point, but we have to do it in the context of getting the spending under control," Portman said.

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Fox News Host Fed Up With GOP Refusal To Offer Specific Debt Ceiling Plan

Tea Party Congressman Steve King (R-IA) appeared on Fox News Tuesday morning to argue in favor of shutting down the federal government and breaching the debt ceiling if President Obama does not agree to drastic spending reductions. “We can start shutting down the appropriations. We can dig in,” King explained. “We must have cuts to go along with any debt increase. They must be substantial. There must be a line.”

But when pressed for specific spending cuts the GOP could support by host Martha MacCallum, King demurred, arguing that any details Republicans offer would simply be attacked as political fotter:

MACCALLUM: I guess what I’m asking for is in terms of a plan, I mean, are you going to put forth something that says, we, the House Republicans believe that this program should be cut, this agency should be cut, these are the spending cuts that we would outline in order to offset the increase in the debt ceiling? We believe that there needs to be cuts and these are what they would be? Are you going to do that?

KING: You know Martha, we’re going to get together this weekend and we’re gona crunch all that out. So I don’t want to presume that there is consensus there I might adhere to. [...]

MACCALLUM: You need to sell that idea to the American people with specifics and with a plan and say we’re the House GOP. Here’s what we would do. Here are the programs we would cut in order to reach parity over the next five years. We may never get this, but we want the American people to understand what we stand for. Is that something we can expect?

KING: Well, Martha, I take your point that we need to sell it with specifics. But you also understand as soon as a specific is put out there, it is attacked by the spending piranhas on the other side.

Watch it:

King’s approach mirrors the tactic of the Republican leadership, which refused to offer spending specifics throughout the debate over the so-called “fiscal cliff,” instead demanding that Democrats detail reductions the GOP might agree to.

Republicans point to the Rep. Paul Ryan’s (R-WI) budget as evidence of the cuts they’ve proposed, but that document is not an appropriations bill that specifies where the cuts will come from.

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Bernanke To House Republicans: Don’t Mess With The Debt Ceiling

Federal Reserve Chairman Ben Bernanke had a succinct message today for lawmakers looking to monkey around with the debt ceiling — don’t do it. He also blew a hole in the myth that the debt ceiling has something to do with future spending, as opposed to spending already authorized by Congress:

Likening Congress to a family arguing that it can improve its credit rating by deciding not to pay its credit card bill, Bernanke said that raising the legal borrowing limit was not the same as authorizing new government spending.

“It’s very, very important that Congress takes the necessary action to raise the debt ceiling to avoid a situation where our government doesn’t pay its bills,” he told an event sponsored by the University of Michigan.

House Republicans have threatened to take the debt ceiling hostage in order to secure cuts to entitlements and other domestic spending. During a press conference today, President Obama excoriated Republicans for trying to take use the debt ceiling as leverage. “They will not collect a ransom in exchange for not crashing the American economy,” he said. “The full faith and credit of the United States of America is not a bargaining chip.”

Bernanke also revealed today that he reads blogs. “Blogs have become pretty important source of intellectual exchange,” he said.

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The debt ceiling must go

By Rep. Jerrold Nadler (D-N.Y.) - 01/11/13 11:30 AM ET

Here is a stubbornly well-kept secret: the debt ceiling is arbitrary, doesn’t affect the deficit, and serves no real function in keeping spending down. In addition, it has recently become a cudgel which extremist Republican legislators use to beat the rest of us into submitting to political blackmail. They say to us: If you do not agree to massive cuts to Social Security, Medicare, Medicaid, and other social programs, we will refuse to raise the debt ceiling and, thereby, cause an economic catastrophe by making the country default on its debts.

The debt ceiling was raised seven times during the George W. Bush administration, with no great battles and no threats of economic chaos. But now that we have a Democratic president, the Republicans have chosen to exploit the debt ceiling as a means of blackmailing the American people in order to impose their extreme and regressive agenda. The result of this extortion, in 2011, was a downgrading of the U.S. credit rating for the first time in history and a terrible compromise that punishes middle and working class people, retracts social safety nets, and inhibits economic progress just when we most need federal leadership toward economic recovery.

There is certainly a time and a place for discussion of the proper levels of taxation and spending, and I am ready to have that discussion. But such discussions need not – must not – be tied to the routine raising of the debt ceiling to pay for debts already incurred. It’s time to repeal the debt ceiling, and I will soon re-introduce legislation to do so.

The facts are plain: eliminating the debt ceiling would not create new deficit spending. That occurs when Congress decides to authorize more spending than revenue. The debt ceiling simply prevents the President from borrowing money to pay the debts when they come due.

Repealing the debt ceiling would ensure that Republican radicals can no longer play a dangerous game of chicken with the full faith and credit of the United States. We cannot risk allowing this artifact of World War I to threaten our nation’s creditworthiness.

Instead, we need to finally focus on the real work at hand: creating jobs and economic development, providing aid to states, building infrastructure, and injecting aggregate demand back into the economy. Then, when the economy has recovered, we can undertake to pay down the national debt.

If we are to prevent years of underemployment and the attrition of America’s great middle class, we must act now. We must not permit an artificial debt ceiling to throw the country into default, and our economy into chaos. It’s time to abolish the debt ceiling.

Nadler is a member of the House Judiciary Committee and the House Transportation and Infrastructure Committee.

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GOP Senators Want To Take Debt Ceiling Hostage In Order To Raise Retirement Age

Two Republican senators want to use the threat of an economic meltdown to raise the retirement age and cut Medicare. Sens. Bob Corker (R-TN) and Lamar Alexander (R-TN) introduced a plan today that would raise the federal debt limit by $1 trillion in exchange for $1 trillion in cuts to Medicare, Medicaid, and Social Security, as The Hill reported:

The Corker-Alexander dollar-for-dollar plan has several components.

It would structurally reform Medicare by creating competing private options giving seniors greater choice of healthcare plans. It would not, however, cap Medicare spending.

The plan would also give states more flexibility to manage Medicaid programs and prevent states from “gaming the federal share of the program with state tax charges.”

It would gradually raise the Social Security retirement age and use the “chained CPI” formula to calculate cost-of-living adjustments, curbing the growing cost of benefits.

In exchange, it would direct the debt limit be increased by the same amount as the savings generated from entitlement reform.

The U.S. will hit its debt limit on or around December 31st. The Treasury Department estimates that, using extraordinary measures, it could avoid default for another two months or so. Allowing the U.S. to default on its debt via not raising the debt ceiling could cause a complete financial meltdown. The 2011 debt ceiling debacle — during which House Republicans nearly pushed the country into a default due to their intransigence on taxes — cost the country about $19 billion in higher interest payments and at least one million jobs.

Corker and Alexander are threatening more economic chaos in order to achieve one of the most regressive potential policy changes. Though lawmakers point to America’s increasing life expectancy in order to justify raising the retirement age, life expectancy is only increasing for wealthier workers in non-physical jobs. As the Center for Economic and Policy Research put it, “there has been a sharp rise in inequality in life expectancy by income over the last three decades that mirrors the growth in inequality in income.”

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It’s Deja Vu All Over Again With Debt Ceiling Fight

“ Once the Democrats know that the debt ceiling will invariably be raised, they have no incentive to play ball. The end result will be another raw deal that is worse than doing nothing.”

There is much hullabaloo in the media about John Boehner’s shot across the bow in the upcoming battle over the debt ceiling this fall.  Specifically, Boehner warned that he “will again insist” on the” simple principle of cuts and reforms greater than the debt limit increase.”

The question is what Boehner means by insisting “again” on spending cuts greater than the debt ceiling increase.  Does he view the failed Budget Control Act (BCA), super committee, and sequester of defense spending as a success?  He has yet to denounce last year’s failure, so why should we look forward to a repeat performance?

The first step in remedying our debt ceiling strategy is to acknowledge the failures of the past.  When Republicans caved on raising the debt limit last year, we referred to the final Boehner proposal as a ground ball into a double play.  Not only did Boehner fail to secure any transformational downsizing of government in exchange for raising the debt ceiling, he actually stymied our leverage in future budget battles.  As we’ve noted, Mitch McConnell and House appropriators have already signaled that they will never cut one cent below the discretionary budget caps established in the BCA.  Hence, the BCA served only to lock in the record spending levels of the Obama-era.  The only real cuts that originated from that deal were the sequester cuts to the military that Boehner agrees we should now vitiate.  So how would he do things differently this time?

In retrospect, it would have been better to pass a clean increase of the debt ceiling and live another day to fight in future spending battles than to pass the BCA.  The BCA ruined our leverage for the next ten years as Democrats and Republicans alike refuse to spend below those statist levels.  Moreover, it has engendered a gratuitous schism in the conservative coalition by pitting spending hawks against defense hawks and forcing Republicans to go through the embarrassment of undoing their own scheme.  Finally, the deal failed to achieve the primary objectives of averting a credit downgrade and slowing the national debt.  The debt has increased another $1.3 trillion in the 9 ½ months since the debt ceiling was raised.  That’s about $5 billion per day.  After the hyped dollar-for-dollar cuts, there is not a single major program or agency that has been eliminated.

The irony is that the debt has increased so rapidly following last summer’s deal that we are already talking about the next debt ceiling battle.  Do we really want a repeat performance?

Going forward, there are only two options: A) Republicans can telegraph the message to Democrats that they will never raise the debt ceiling without prior passage of something similar to Cut, Cap, and Balance – and that they would be willing to go to the brink.  B) They admit that they are too scared to take this to the brink, and as such, agree to let Obama raise the debt ceiling.  There is no option C, which would repeat the mistakes of last year.  In other words, it is insane to tell the Democrats that you would never let the deadline pass, yet demand concession for the debt ceiling increase.  Once the Democrats know that the debt ceiling will invariably be raised, they have no incentive to play ball.  The end result will be another raw deal that is worse than doing nothing.  This has occurred time and again throughout every budget battle and it’s time we end this insanity.  We don’t need to hear the tough talk and bravado if there is no intent to carry through with it.

Boehner noted at his speech before the Peter G. Peterson Foundation Fiscal Summit that “we shouldn’t dread the debt limit. We should welcome it.”  He punctuated that belief by calling the debt ceiling “an action-forcing event in a town that has become infamous for inaction.”

Undoubtedly, the debt ceiling will provide us with yet another opportunity to expose the Democrats as the statist European-socialists who are apathetic to our debt crisis.  However, there are all sorts of actions; some are good and some are bad.  Grounding into a double play is worse than striking out.  Sadly, based on our painful experience from last year, inaction might be superior to the action that will evolve from the ranks of the consultant class of the Republican Party.

Cross-posted from The Madison Project

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