House Budget Committee Chairman Paul Ryan said Republican leaders haven’t pledged to raise the nation’s debt limit yet, even as Treasury Secretary Timothy Geithner said they know it’s necessary.
The Wisconsin Republican congressman, who won House approval last week of his plan to cut more than $6 trillion in spending over a decade, said Republicans will continue to demand that any debt-limit increase be accompanied by additional spending cuts.
“We won’t raise, just simply raise, the debt limit,” Ryan said yesterday on CBS’s “Face the Nation” program. “We will vote to have spending cuts and controls in conjunction with the debt limit increase.”
As the federal government approaches its borrowing limit of $14.3 trillion, Republican and Democratic leaders spent the weekend jockeying for political advantage over what conditions should be attached, if any, to a debt-limit increase. Geithner said the administration remains confident that a deal will come together to avoid unsettling financial markets.
The Treasury projects the national debt will reach that limit by May 16, though it could use emergency measures to avoid default until about July 8. Geithner has warned that not raising the limit could trigger another financial and economic crisis worse than the one the country has just survived.
Geithner, appearing on ABC’s “This Week” program, said congressional leaders again pledged to increase the debt limit at a meeting with President Barack Obama at the White House on April 13.
“There’s no alternative, and they recognize that,” Geithner said. “I sat there with them, and they said, we recognize we have to do this. And we’re not going to play around with it. Because we know -- we know that the risk would be catastrophic.”
Ryan disputed that account, saying, “We want cuts in spending accompanying a raising of the debt ceiling. And that is what I believe they’ve told the president.”
The Obama administration still wants Congress to pass a “clean bill” that raises the debt limit without additional spending curbs. Ryan rejected that approach yesterday, saying Republicans can’t support greater borrowing without taking additional steps to reduce the federal deficit at the same time.
“Nobody is saying we want to see default,” Ryan said. “We want to get cuts in controls and on spending going forward, and that is what we’ve been telling the White House.”
Republican senators are considering a plan to tie an increase in the debt ceiling to a cap on federal spending at 20.6 percent of gross domestic product within 10 years.
The debt issue resonates among ‘tea party’ Republican lawmakers who won office last fall pledging to slash government spending.
Shaking Things Up
“The people of Kentucky elected me to shake things up,” said freshman Senator Rand Paul, a Kentucky Republican who won his seat with Tea Party backing. “They didn’t elect me to raise the debt ceiling,” he said yesterday on CNN’s “State of the Union.”
Paul said he would support an increase in the debt limit only if it is tied to passage of a balanced-budget amendment to the Constitution.
“I would vote to raise the debt ceiling if we passed a balanced-budget amendment to the Constitution and say from here on out, this is the last time we’re doing it,” he said.
Representative Anthony Weiner, a New York Democrat, said Democrats may be open to a debt-limit package that includes some spending curbs, up to a point.
“I know debt limits frequently have things attached,” Weiner said on CNN. “I understand that. But I have to tell you, if they wind up holding up things like Medicare, Social Security, these bedrock programs that help people in need and help form the safety net in our country, it is a non-starter. Democrats won’t vote for it.”
Senator Mark Warner, a former Virginia governor who is part of a so-called “Gang of Six” senators seeking a bipartisan budget compromise, said he was troubled by the political brinkmanship as the government nears the debt-limit deadline.
“You get close to that debt limit and you could actually scare the bond market,” Warner said on CBS. “They could end up raising interest rates, which would dramatically cut back on the recovery.”
Warner said the Gang of Six, made up of three Democrats and three Republicans, is considering a combination of spending cuts and tax increases. He said the plan would call for $3 in spending cuts for every dollar in new tax revenue. The additional tax revenue, he said, would come from lower tax rates combined with eliminating tax deductions and loopholes.
Warner criticized Ryan’s budget plan as inadequate because it tries to solve the deficit problem only with spending cuts.
While the government now spends close to 25 percent of gross domestic product, Warner said, “our revenues are at an all-time low at about 15 percent.”
Ryan said he favors lowering tax rates in exchange for eliminating deductions and loopholes -- a formula similar to what Warner described.
“We don’t have a tax problem,” Ryan said. “Our revenues are going back to where they have been historically.”
Alan Greenspan, a former Federal Reserve chairman, said yesterday he favors letting all the Bush-era tax cuts expire for all income levels to help reduce the deficit.
“I think this crisis is so imminent and so difficult that I think we have to allow the so-called Bush tax cuts all to expire,” Greenspan said on NBC’s “Meet the Press.”
For all the debate about the deficit in Washington, bond market yields in the U.S. are lower now than when the government was running a budget surplus a decade ago, even though Treasury Department data show that the amount of marketable debt outstanding has risen to $9.13 trillion from $4.34 trillion in mid-2007.
The yield on the benchmark 10-year note is below the average of 6.92 percent since 1980, according to Bloomberg Bond Trader prices.
The Republican-controlled House on April 15 passed a budget blueprint that relies exclusively on spending cuts to reduce the deficit, slicing $6.2 trillion over 10 years from Medicare and scores of other programs including Medicaid, food stamps, farm subsidies and Pell college tuition grants.
It calls for replacing the traditional Medicare health-care system for the elderly with subsidies to buy private insurance, starting with people who turn 65 in 2022. It also would cut the top corporate and individual tax rates from 35 percent to 25 percent. The plan wouldn’t balance the government’s books until 2040.
The measure is certain to die in the Democratic-controlled Senate, where leaders have endorsed Obama’s competing call for using a combination of spending cuts and tax increases.