U.S. lawmakers allied with the “absolutist” Tea Party have put the nation on the financial brink with their aversion to compromise, Senator Lisa Murkowski said.
“I am really worried about where we are standing, and I think part of that has come about because you have individuals that say it is my ‘way or the highway,’” Murkowski, an Alaska Republican, said yesterday in an interview at Bloomberg’s Washington office. “That is not how you govern.”
House Republicans backed by the Tea Party have vowed to support an increase in the $14.3 trillion debt limit only if it’s accompanied by spending cuts and doesn’t raise taxes. President Barack Obama and Democrats propose a mix of tax increases and spending reductions.
“You have folks who are so black-and-white, who are so absolutist, that we are in a process now where we are on the brink,” said Murkowski, 54, who was defeated by a Tea Party supporter last year in a Republican primary and then re-elected as a write-in candidate.
The senator said she backs the proposal advanced by the Gang of Six, “or some iteration of it.” The bipartisan group of senators called the Gang of Six has proposed to cut the budget deficit by $3.7 trillion using a combination of spending cuts and an overhaul of taxes that would raise $1 trillion. Obama endorsed the plan, while House Republicans balked at the tax increases.
‘Damaging The Process’
“Those that believe that compromise is a dirty word, that believe that there is no place for compromise within their efforts, I think are damaging the process,” she said yesterday.
U.S. borrowing will exceed congressional authority on Aug. 2 unless Congress raises the debt ceiling, Treasury Secretary Timothy Geithner has said.
A short-term extension of borrowing authority may be the best option to prevent a U.S. default, giving lawmakers more time to wrestle with plans to cut the deficit, Murkowski said.
“I think that has to be our fallback position,” she said.
The Federal Reserve is preparing guidance for banks in the event the debt limit isn’t raised and the Treasury Department runs out of money to pay all of its bills, a government official said yesterday.
The guidance would cover issues including how payments on short-term loans are made, collateral pledged for loans as well as other supervisory and regulatory matters, said the official, who asked not to be identified because congressional negotiations on the debt limit are still under way.
A credit-rating downgrade of U.S. Treasury securities caused by a failure to increase the borrowing authority would affect collateral pledged for loans.
Standard & Poor’s on July 14 said there’s a 50 percent chance the U.S. AAA rating would be cut from the highest grade within 90 days even if an agreement is reached by Aug. 2. S&P said it needs to see “a credible solution to the rising U.S. government debt burden.”
The Senate is unified to ensure the U.S. meets its debt obligations, according to Murkowski.
“I think we avoid the default,” she said. “I don’t know if we avoid the downgrade, and I’ve got real concerns about that.”
The debt and budget issues are “sucking the air out of the room” for other issues, Murkowski said. “And if in fact we go into a situation where it’s a short-term extension, my fear is that this will continue for the balance of the year,” resulting in very little new legislation.
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