The U.S. won’t have to default on its obligations to bondholders even if Congress fails to raise the $14.3 trillion debt ceiling by an August deadline, Republican Senator Ron Johnson said.
“If we don’t increase the debt ceiling, we’ll have to live within our means,” the freshman from Wisconsin said in an interview on Bloomberg Television’s “Political Capital with Al Hunt” airing this weekend.
Treasury Secretary Tim Geithner, Wall Street executives and economists have warned lawmakers that a failure to raise the debt ceiling would have disastrous economic consequences for the country. The Treasury Department has projected that its borrowing authority will expire Aug. 2.
Johnson is one of dozens of Tea Party-allied lawmakers who reject Geithner’s warnings. Their views underscore the difficulties facing Republican leaders as they try to reach a deficit-reduction deal with President Barack Obama that would pave the way for a vote to raise the debt ceiling. Republicans insist on major spending cuts and no tax increases.
The odds that leaders will fail to get a deal by August are “higher than they should be,” said Johnson, who accused Obama of failing to engage in the talks until last week. “We should have had all this on the table, a serious plan, four months ago.”
The U.S. has enough money to pay the interest on the debt, Social Security benefits, military pay and secured creditors, said Johnson. Other creditors, including those due tax refunds or farm payments, might get 60 percent of their payment until Congress agrees to make major spending cuts in return for raising the debt limit, he said.
“What I fear far more than what’s going to happen with the deficit, I fear the actual structural bankrupting of America,” Johnson said, pointing to “the day of reckoning when we are no long the reserve currency.”
House Speaker John Boehner, an Ohio Republican, told reporters yesterday that missing the debt-limit deadline would cause economic harm to the U.S.
“While some think we can go past Aug. 2, I frankly think it puts us in an awful lot of jeopardy and puts our economy in jeopardy,” Boehner said. “It’s important we come to an agreement, but it has to be an agreement that really does fundamentally change our spending and our debt situation.”
Republicans, pressed by Obama to consider raising taxes to reduce the debt, are weighing whether to close loopholes and eliminate some tax breaks in exchange for a commitment from Democrats that Congress will act later on a broad overhaul to reduce tax rates.
Johnson didn’t rule out accepting a deal that would include tax increases.
“I’m opposed to those special tax deals but not opposed to legitimate business deductions,” he said.
Johnson, who has accused Obama of demagoguery on the deficit, denied he was doing the same thing when he called the national health-care overhaul the president pushed through Congress last year “the greatest single threat to my freedom.”
Asked whether the health-care law was a greater threat than communism, Johnson said, “I wasn’t threatened under communism.”