There is no need to raise the debt limit to meet debt interest obligations…income far surpasses that now.
Cut the other programs…if they can’t choose…then a 50% cross the board cut would be good alternative. B http://online.wsj.com/article/SB10001424052748703864204576313302806557610.html?mod=djemEditorialPage_h#printMode The Wall Street Journal <http://s.wsj.net/img/wsj_print.gif> REVIEW & OUTLOOK MAY 10, 2011 Boehner's Debt-Limit Marker The bond market would love a deal that reduced future U.S. borrowing. * House Speaker John Boehner Monday night visited the belly of the bond market, in New York City, to put down a policy marker in the debate over raising the national debt ceiling. And lo, the sky did not fall, the seas did not burn, and the financiers did not wail and gnash their teeth. Maybe they've concluded that the real threat to America's credit standing is raising the debt limit again without a plan to control spending. "It's true that allowing America to default would be irresponsible," Mr. Boehner told the New York Economic Club. "But it would be more irresponsible to raise the debt ceiling without simultaneously taking dramatic steps to reduce spending and reform the budget process." The Speaker then got to the news, which was laying out what House Republicans want in return for raising the debt limit this year: "Without significant spending cuts and reforms to reduce our debt, there will be no debt limit increase. And the cuts should be greater than the accompanying increase in debt authority the President is given." In other words, if President Obama wants a $2 trillion increase in the statutory debt limit from today's $14.294 trillion, he will have to accept $2 trillion in spending cuts. Mr. Boehner didn't spell this out, but his advisers tell us that those cuts would have to be scored as real by the Congressional Budget Office over a five-year budget window. "We should be talking about cuts of trillions, not just billions," the House leader said. "They should be actual cuts and program reforms, not broad deficit or debt targets that punt the tough questions to the future." This is political progress. Treasury Secretary Tim Geithner started out this year asking for a "clean" increase in the debt limit without conditions. Treasury officials, Federal Reserve Chairman Ben Bernanke and their allies on Wall Street and in the media have all been predicting economic Armageddon if the debt limit isn't raised promptly. View Full Image 0414boehner2 <http://si.wsj.net/public/resources/images/OB-NN177_0414bo_D_20110414164915.jpg> Getty Images Speaker of the House John Boehner But this is financial melodrama. The reality is that no one in any position of responsibility wants the U.S. to default on its debt. A default isn't going to happen, and the bond markets know it, notwithstanding the Administration's scare tactics. The real question isn't whether the U.S. will meet its debt obligations but what the government will do to control its spending habits. Federal debt held by the public—the kind the government has to pay back—as a share of GDP has soared in the Obama years and is now near 70% and rising. No one knows when the world's creditors will lose their appetite for U.S. debt, but no nation should want to tempt fate. Debt-limit brinksmanship won't be pretty, but this is no ordinary moment. Mr. Obama made clear with his over-the-top assault on Paul Ryan's House Republican budget that he won't make any serious spending concessions unless he has no political choice. That means the debt limit—which must be raised—is the main point of leverage that Republicans have to force Mr. Obama's cooperation. All the more so because the public seems to agree. Some polls show that a majority opposes any increase in the debt limit, which may be impractical but reflects voter desire to restrain Washington. Democrats can read these polls as well as Republicans. By that measure, Mr. Boehner's formula of a dollar in spending cuts for every dollar of new debt authority has some promise. If Mr. Obama wants a big increase in the debt limit, then he is going to have to engage on reforming the big entitlement programs like Medicaid, Medicare and perhaps even Social Security. If he refuses to discuss those programs, then Republicans can approve a smaller debt increase, cut domestic discretionary accounts in the interim, and wait for Mr. Obama to ask again for a debt increase. If the President wants the debt issue to dominate the political debate every three months through Election Day next year, so be it. That's sturdier political ground for the GOP than it is for liberals. The key for Republicans will be making any spending cuts and budget reform enforceable. While no Congress can bind its successors, Mr. Boehner can insist that spending cuts be automatic if annual caps are exceeded. He can also make repealing such caps harder by requiring a supermajority (two-thirds) vote of both houses of Congress. Democrats will have a hard time saying they oppose caps because they aren't easy enough to evade. We're also glad Mr. Boehner ruled out tax increases in a debt-limit deal. Mr. Obama wants automatic tax hikes—via automatic reductions in certain tax deductions—if Congress exceeds debt caps. But that is merely an invitation for Congress not to meet those caps so it can automatically grab more revenue. Tax revenue will rise faster with faster economic growth, and a tax increase will hurt an economy that is still not growing nearly fast enough. Ah, but what about the bond markets—won't they panic as the debt limit draws near and Treasury predicts disaster? We doubt it. Bond holders want above all to know they'll be repaid, preferably in uninflated dollars, and the best guarantee of repayment will be evidence that Washington has finally donned a fiscal straightjacket. The real path to default is to keep raising the debt limit as if the Treasury can borrow more forever. Ask the Greeks (see below) how that's working out. [Non-text portions of this message have been removed] ------------------------------------ -------------------------- Want to discuss this topic? Head on over to our discussion list, [email protected]. -------------------------- Brooks Isoldi, editor [email protected] http://www.intellnet.org Post message: [email protected] Subscribe: [email protected] Unsubscribe: [email protected] *** FAIR USE NOTICE. This message contains copyrighted material whose use has not been specifically authorized by the copyright owner. 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