Congressional Republicans don’t want any more deficit spending–unless it’s deficit spending done through the tax code. They think they can play a good game of “chicken” when it comes to the statutory debt ceiling by refusing to raise it, as discussed in this AP story by Douglass Daniel (emphasis added):
WASHINGTON – Some Republican lawmakers said Sunday they opposed raising the ceiling on the nation’s debt without tackling government spending, and President Barack Obama’s top economic adviser warned against “playing chicken” on the issue.
The federal debt is limited to $14.3 trillion, but the debt now stands at nearly $13.9 trillion and is growing daily. Congress last raised the debt ceiling in February 2010 and is expected to consider raising it again as early as March.
To some conservatives, refusing to raise the limit on the federal debt could be an effective tactic to force lawmakers into cutting spending and facing such contentious issues as the rising costs of Social Security, Medicare and other entitlement programs.
Austan Goolsbee, the chairman of the White House Council of Economic Advisers, said that refusing to raise the debt ceiling would essentially push the country into defaulting on its financial obligations for the first time in its history.
“The impact on the economy would be catastrophic,” Goolsbee told “This Week” on ABC. “That would be a worse financial economic crisis than anything we saw in 2008.”
Goolsbee added: “I don’t see why anybody’s talking about playing chicken with the debt ceiling.”
While saying that defaulting would be “very bad” for the U.S. position in the world, Sen. Lindsey Graham, R-S.C., said he would not vote for raising the limit on the federal debt unless there were a plan in place for dealing with long-term obligations, including Social Security, and for returning to 2008 spending levels.
But hitting the debt ceiling won’t stop those “spending ways” because policymakers aren’t really willing to stop those “spending ways.” It wouldn’t reform the Social Security and Medicare programs or automatically repeal any other kind of government spending (wasteful or otherwise). Instead of being a magic brake on deficit-financed government spending, it would be a disastrous brake on financial markets and the entire U.S. and global economy.
The policymakers making these threats about letting the government default don’t really want the government to default. They just really don’t want to do anything that would really address the problem. There’s not enough wasteful spending out there that they are willing to say they will cut. Even the Republicans who would like to see Social Security and Medicare very radically reformed don’t want to cut those programs’ benefits anytime soon.
And those policymakers now threatening to let the government default really don’t want to accept what the fiscal commissions told them: that the debt problem is not just the fault of too much spending, but also too little taxes. In fact, with their new “cut as you go” rule, House Republicans are going out of their way to make sure the debt can keep on rising with more deficit-financed tax cuts, and that tax increases of any sort (including reducing tax expenditures) can’t be used to offset deficit spending of any kind (whether tax cuts or direct spending). From the House Republican rules committee description:
Cut-as-you-go will be included in the House rules.
It’s a new rule that says we can only keep enlarging the federal debt via deficit-financed tax cuts. But that’s obviously not a “rule” we need to have imposed upon us. We’ve been doing it unofficially, even under Democratic pay-go rules that did not officially exempt tax cuts, for years.
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