Speaker Boehner holds debt ceiling increase hostage to appease Tea Party base
House Speaker John Boehner issued a blunt threat to Democrats this week that unless GOP demands for zero tax increases and drastic budget cuts are met, House Republicans will not raise the nation’s debt ceiling, forcing the United States to potentially default on its debt obligations.
Boehner’s comments contradict earlier conciliatory and bipartisan tone taken by Republican lawmakers negotiating with Democrats on the debt limit increase and how to address the nation’s $14.3 trillion national debt. Without Congressional approval to raise the debt limit, the U.S. would be forced to default on the debts already approved and spent by Congress.
In his third letter to Boehner since January, U.S. Treasury Secretary Timothy Geithner wrote that unless Congress approves a debt limit increase by Aug. 2, the United States will not be able to meet its “payment of obligations Congress has already approved to its citizens, servicemen and women, businesses, and investors.”
“Default by the United States on its obligations would have a catastrophic impact that would be felt by every American. A broad range of government payments would have to be stopped, limited or delayed, including military salaries, Social Security and Medicare payments, interest on debt, unemployment benefits and tax refunds,” Geithner wrote. “A default on the Nation’s legal obligations would lead to sharply higher interest rates and borrowing costs, declining home values and reduced retirement savings for Americans. Default would cause a financial crisis potentially more severe than the crisis from which we are only now starting to recover.”
However, Boehner and his Republican cronies are willing to risk the unprecedented debt default by the United States and a global financial crisis to appease the no-taxes-cut-all-government-spending Tea Party base.
In particular, Boehner is demanding:
1. Absolutely zero tax increases, even for wealthy millionaires who are still benefiting from the Bush tax breaks extended through 2012, to balance the federal budget and reduce national debt.
2. “Dramatic” cuts in the trillions to the federal budget, including Medicare. (Sorry, old people. The Republicans apparently view you as a financial burden and are hell-bent on “reforming” Medicare to reduce benefits that you’ve already paid for in your federal income taxes.)
“It’s true that allowing America to default would be irresponsible,” Boehner said during his address at the Economic Club of New York. “So let me be as clear as I can be. Without significant spending cuts and changes in the way we spend the American people’s money, there will be no increase in the debt limit. And the cuts should be greater than the accompanying increase in the debt limit that the President is given. We’re not talking about billions here. We should be talking about cuts in trillions if we’re serious about addressing America’s fiscal problems…And with the exception of tax hikes, which in my opinion would destroy American jobs, everything is on the table, and I mean everything.”
It’s important to keep in mind that then-President Bush and his Republican Congress (which includes Boehner) plunged the country into two simultaneous wars in Iraq and Afghanistan, costing taxpayers more than $1.4 trillion since 2001, while they slashed federal income taxes for millionaires. Yet, the GOP expects seniors, middle-class families, and small businesses to foot all the bills and receive less benefits that they’ve paid for.
May 9, 2011
Let me also start by expressing my admiration for what all of you do. You know you come from many different backgrounds, but you’re united by a common interest in the prosperity and security of our nation. Last night marked one week since the operation against Osama bin Laden, the man who orchestrated the horrific attack against this city nearly 10 years ago. Bringing justice to bin Laden was an important moment for America and, I think, for all of the free world. But the challenges that lie ahead here at home remain formidable. I’m grateful for the opportunity to share my thoughts tonight on how we need to address those challenges together as a nation.
I came to be Speaker by way of small business, as Andrew pointed out. Before I ran for Congress, I ran a small business in Westchester, Ohio – Nucite Sales. We were manufacturers’ representatives in the packaging and plastics industries. But as Andrew mentioned, my first life experience in small business wasn’t in my business, but it was mopping floors, doing dishes, waiting tables at my father’s bar in Cincinnati, Ohio. My grandfather started this place in the ’30s, my dad and his brothers ran it for decades, and my sister ran it for 20 years thereafter. So it’d be fair to say that I’m not from around here. I come from a working class family of Kennedy Democrats, and my 11 brothers and sisters – we’ve done every job there ever was and grateful to have all of them. But all of these efforts taught me an awful lot long before I entered government service. They taught me that our economy is a product of the American people, and our economy does best when the government respects the people enough to give them the freedom to do what they do best.
I believe that our mission as legislators is to liberate our economy from things that impede growth, to provide clear policies so that innovators and entrepreneurs have the green light to move forward and create jobs without having to worry about a lot of second guessing coming from Washington D.C.
So my message to you tonight is that we will not succeed in balancing the federal budget and overcoming the challenges of our debt until we commit our government to policies that let our economy achieve long-term economic growth. Our economy won’t grow as we continue to trip it up with a lot of short-term gimmicks from Washington, D.C. Many of the problems we face can be traced to misguided beliefs by politicians that the American economy is something that can be controlled or micromanaged or “positively” influenced by government intervention and borrowing.
All too often, rather than providing long-term policies that will help our economy, the government offers short-term fixes that will do little right away or, frankly, end up making things worse over the long term.
When things aren’t going well in our economy, the impulse in Washington is usually to respond with something big, you know, something “comprehensive.” The assumption is that it’ll provide reassurances to America’s job creators, but it usually has the opposite affect in practice.
We saw this with the Dodd-Frank financial services bill. The financial meltdown was going across our country, millions of Americans were hit hard, but Washington’s response was all wrong. We’ve got banking system that’s now less competitive, pitting small community banks – like I have in my district – against the giant banks that the government has determined are “too big” to fail. We’ve got now a consolidated banking system with a small number of large firms that are operating actually as public utilities. We’ve got a lot of new rules that make job creation and investment far more difficult than it should be. And the mortgage companies that led to this meltdown were not even regulated at all as a result of this legislation.
Now for job creators, the promise of a new initiative coming out of Washington is more like a threat. It freezes them. Instead of powering new employees or new equipment, they make the logical decision to sit on their hands.
The American economy is the total sum of the hard work and ingenuity of the American people. When the economy grows it’s not because of some new government program or some new spending initiative. It’s because a lot of people in the private sector work hard and were successful in overcoming the obstacles that we’ve put in their way. The rash of stimulus legislation that’s passed by Congress in recent years has been one of those obstacles. The recent spending binge – stimulus spending binge – frankly hurt our economy and hampered private sector job creation in our country.
The effect of adding nearly a trillion dollars worth of debt in money mostly borrowed from foreign investors cause a further erosion in the economic confidence of America and increase uncertainty for millions of private sector job creators. This massive borrowing and spending by the Treasury Department crowded out private investment by American businesses of all sizes.
Americans were told the stimulus would create millions of new jobs and that most of them would be private sector jobs. Well, it didn’t happen. Job creators were looking for certainty, and you don’t get long-term certainty from short-term government programs. I think the lesson of the stimulus era is that short-term government intervention is no substitute for long-term economic investment, private initiative, and freedom. So I believe it’s time to leave that era behind.
We’ve also seen the arrogance of government recently in the skyrocketing price of gasoline that our citizens and businesses are dealing with. There’s a clear connection between higher gas prices and the weak dollar that some in Washington has quietly welcomed over the last few years. But it’s well known that when you print tons of new money that the dollar sinks and the price of food and energy rise significantly. Yet the American people are told “There’s nothing we can do about it.” Well, that’s just not true.
Washington has also kept most of America’s energy reserves under lock and key for decades over the clear objections of the American people – the people who actually own these resources. Now if we had listened to the American people decades ago or maybe even three or four years ago, many of those resources would be available to us right now to lower the price of energy, and we would probably have a million people working in the energy sector – additional people working in the energy sector than we do today. Instead, Washington has done – what they’ve done is raise the specter of higher taxes, creating more uncertainty for those who create American jobs.
I think Washington’s arrogance has triggered a rebellion in our country. And yes, I don’t think rebellion is too strong of a word. The revolt that we’ve seen around the country by ordinary citizens over the past few years is nothing that we’ve ever seen in our lifetime. It’s happening in part because of the arrogant habits of Washington, and the economic consequences they’re having on the American people.
I think this debt limit debate that we’re starting to deal with gives our nation’s leaders an opportunity to reverse those habits and prove that we’re starting to hear the message from the American people. It’s a chance to change course and admit that reactionary, short-term Washington solutions aren’t always the best. Creating a sustainable fiscal structure for the federal government is essential for long-term economic growth particularly when it comes to entitlements. We’ve got a chance to provide certainty to job creators by signaling that our government is finally willing to take a new approach when it comes to spending and borrowing that has put our country into such deep debt.
As you know, the President has asked Congress to increase the debt limit and to do so without preconditions. Some are insisting that we shouldn’t play games with it. Others have even gone further. One prominent figure went so far to say that the people who are threatening not to pass the debt ceiling are our version of al Qaeda terrorists. Well, with all due respect, this is the arrogance of power, and the American people will not stand for it. This is the time to end the spending binge, modernize and prioritize what it is we’re going to spend the taxpayer money on.
Now there’s a reason the debt limit can’t be increased without an act of Congress. The debt limit is set in statute specifically so that the executive branch and the legislative branch have to begin to deal with each other on the fiscal consequences of increasing the debt limit. Now, I know that there are a lot of you that are somewhat uneasy about this debate, and let me tell you I understand your concerns.
It’s true that allowing America to default would be irresponsible. But it would be more irresponsible to raise the debt limit without simultaneously taking dramatic steps to reduce spending and to reform the budget process. To increase the debt limit without simultaneously addressing the drivers of our debt, in defiance of the will of the American people, would be monumentally arrogant and, I think, massively irresponsible. It would send a signal to investors and entrepreneurs everywhere that America is still not serious about dealing with our spending addiction. I think it would erode confidence in our economy and reduce the certainty for small businesses, and I think frankly would kill even more American jobs.
So let me be as clear as I can be. Without significant spending cuts and changes in the way we spend the American people’s money, there will be no increase in the debt limit. And the cuts should be greater than the accompanying increase in the debt limit that the President is given. We’re not talking about billions here. We should be talking about cuts in trillions if we’re serious about addressing America’s fiscal problems. And these should be actual cuts, real reforms to these programs, not broad deficit or deficits targets that punt the questions to the future. And with the exception of tax hikes, which in my opinion would destroy American jobs, everything is on the table, and I mean everything. That includes honest conversations on how to best preserve Medicare because without changing Medicare with millions of baby boomers about to retire the status quo is unsustainable.
If we don’t act boldly now, the markets will act for us very soon, which I think was the message from Standard & Poors several weeks ago. And if we fail to use this moment to demonstrate that we’re getting serious about fixing the debt, the result would be fewer jobs, less confidence, and more uncertainty.
The debt limit debate is also critical because it’s forcing us to make choices as a nation right now. It’s a choice between the policies of the past and a new vision that acknowledges that we can’t tax, borrow, and spend our way back to prosperity.
The big myth of the current budget debate is the notion that in order to balance the budget that we need to raise taxes. Well, the truth is we will never balance the budget and rid our nation of debt unless we cut spending and have real economic growth. We will never have real economic growth if we’re going to raise taxes on those in the America who create jobs.
I ran for Congress in 1990, the year our nation’s leaders struck a so-called bargain that raised taxes as part of a bipartisan deal to balance the budget. Well, the result of that so-called bargain was that we ended up in a recession in the early 1990s. It wasn’t until the economy recovered in the late 1990s that we were able to actually balance the budget. So today some seem intent on recycling the 1990 budget deal only this time with much larger tax increases. This is not going to happen, and I’ve told that to the President directly. A tax hike would wreck havoc not only on our nation’s economy and its ability to create private sector jobs but also on our ability to tackle the national debt.
Balancing the budget requires spending cuts and real economic growth. And we won’t have economic growth if we raise taxes and fail to address the drivers of our debt. The mere threat of tax hikes creates more uncertainty for job creators and more uncertainty that results in less risk taking and fewer jobs. So if we’re serious about the budget and getting our economy back to creating jobs, tax hikes should be off the table.
I mention this because I was raised in a family of Kennedy Democrats. Before this very club in 1962, President Kennedy said the following: “Our true choice is not between tax reduction on the one hand and avoidance of a large federal deficits on the other. It is increasingly clear that no matter what party is in power, so long as our needs keep rising, an economy hampered by restrictive tax rates never produce enough revenues to balance our budget just as it will never produce enough jobs or enough profits.” Rather than increasing government spending, President Kennedy told this club that we should cut taxes significantly and take steps to increase incentives and the availability of investment capital for employers.
Now, I would note that my colleagues and I are not calling for tax cuts in this budget. Rather, we’re calling for the end to the threat of tax hikes and a fundamental reform of our tax code so that we can provide more certainty for our job creators. We’re calling for an end to the government spending binge that’s crowding out private investment and threatening the availability of capital for much-needed investment in our economy.
Now there’s another myth I need to address. It’s the myth that our debt challenges require pain. Let me tell you addressing our debt requires action; pain only comes from inaction and suffering from a standing pat and waiting for investors, job creators, and capital markets to impose a solution on us before elected leaders could do it on their own.
You know, root canal economics has a name: doing nothing. I can just tell you the greatest threat to our economy and the greatest threat to our future is for Washington to kick the can down the road again and do nothing. We urgently need to enact reforms that will protect and preserve critical programs like Medicare and Medicaid. And if we do nothing, as some proposed, that guarantees benefit cuts for seniors. Now let me repeat that because it’s a crucial point in this debate: If we do nothing, seniors’ benefits will in fact be cut.
And to those who contend that the economy is too weak to take on this challenge of entitlement reform, I will simply say they’ve got it backwards. The truth is that making fundamental reforms to these programs will be good for our economy and good for the next generation. Now, it’s possible to make changes in a way that will ensure future beneficiaries will have access to the same kinds of options that members of Congress currently have. The budget that has been put forward by our Budget Committee Chairman Paul Ryan, I think, accomplishes this. Instead of raising taxes, it calls for fundamental reform of the tax code, a priority for us that will be led by Dave Camp from Michigan, the chairman of the House Ways and Means Committee.
Now there are also other steps that need to be taken immediately to help free our economy and support private sector job creation, many of them are outlined in our Pledge to America, the governing agenda that we put forward by listening to the American people. You know, we can stop the Environmental Protection Agency from imposing a backdoor energy tax that will further increase gas prices and destroy jobs. We can pass the REINS Act, authored by my colleague from Kentucky Geoff Davis, that would require the Congress to vote on every new regulation that has a more than $100 million effect on our economy. We can pass the trade agreements – Columbia, Panama, South Korea – that will boost our economy by opening new markets to our goods. I think those couple with the spending reforms and tax reforms that I’ve outlined, these policies create a path for long-term, sustained economic growth. And with such policies in place, we actually can balance the federal budget.
In closing, let me say that I’m humbled by the opportunity to serve in the United States Congress. I think owe it to the American people to ensure that the opportunities of our generation are there for future generations. I think that we owe them a humbler government that learns to live within its means and values the entrepreneurial drive of our people with policies that unleash the awesome potential of our economy. Now, for those of us in Washington, I think this has to be our focus. Until our economy is back on track and the American dream is restored, there is – can’t be – and is no rest. And I think it starts with freedom. In America, it always has been. But let me just say that this is the moment. This is the opportunity to deal with our long-term fiscal challenges, and we cannot let this moment pass.
Thanks for the opportunity to be with all of you tonight, and I’ll look forward to your questions.
- YouTube.com/JohnBoehner: Video of House Speaker John Boehner’s speech at The Economic Club of New York on May 9th
- U.S. Treasury: Get the Facts: Raising the Debt Limit
- U.S. Treasury Secretary Tim Geithner’s letter to House Speaker John Boehner on May 2, 2011 (PDF)
- JohnBoehner.House.Gov: Excerpts of Congressman Boehner’s Address to the Economic Club of New York on Jobs, Debt, Gas Prices
- Politico.com: John Boehner’s debt pitch has risks for GOP
- WashingtonPost.com: Boehner declares tax hikes ‘off the table,’ drawing White House rebuke
- CSMonitor.com: John Boehner’s tough talk on debt limit: a departure from history
- Reuters.com: Boehner raises the bar for cuts in debt talks
- CNN.com: GOP demands trillions in cuts as budget talks resume
- Center on Budget and Policy Priorities: Policy Basics: Where do our federal tax dollars go?
- Congressional Research Service: The Cost of Iraq, Afghanistan, and Other Global War on Terror Operations Since 9/11 report released March 2011 (PDF)