Boehner’s smart move on debt ceiling, spending cuts

The House Republicans have been setting the terms of the budget debate ever since Rep. Paul Ryan unveiled his “Path to Prosperity,” and now they’ve upped the ante. In a speech in New York City, Speaker John Boehner said any increase in the federal government’s debt limit must be accompanied by even larger spending cuts:

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.

A few thoughts on why this is good policy and good politics:

First, it’s good policy because a “clean bill” to raise the debt ceiling, as the Obama administration wants, would be disastrous policy. Congress has proven that the mere requirement to raise the ceiling is not a sufficient restraint. And it’s become clear that the 2012 budget is not going to produce a grand bargain. If there’s going to be a compromise that begins to apply some semblance of fiscal discipline to Washington, the debt ceiling is the time for it.

Second, it’s good policy because a more-cuts-than-new-authority approach is perhaps the only way to put teeth into the restraint side of the compromise. In an editorial, The Wall Street Journal reports that Boehner’s advisers say “those cuts would have to be scored as real by the Congressional Budget Office over a five-year budget window.” This is hardly Draconian: A debt-ceiling increase of $2 trillion through the end of fiscal 2012 — which the White House says is necessary to keep the government running until Oct. 1, 2012 — would mean spending cuts of $2 trillion over five years, or $400 billion a year. In fact, it comes closer to being too weak a proposal given the severity of our debt problem. A $400 billion cut this year could still leave us with an annual budget deficit approaching $1 trillion.

Third, it’s good politics because it shows the House GOP learned a thing or two from its negotiations over the budget for the remainder of fiscal 2011. Note the part of the above quote about “scored as real by the Congressional Budget Office.” Republicans got burned when the $38 billion in 2011 budget cuts turned out to be more like $352 million this year — just 1 percent as much as advertised. The cuts can’t consist of programs that were already discontinued or mere reductions from what President Obama has requested for 2012. They need to be taken from real spending levels this year.

Fourth, it’s good politics because it’s common sense. Opinion polls (see question 10 in this recent one, for example) show Americans strongly disagree with raising the debt ceiling in the first place. So, raising it at all is an act of compromise with taxpayers. The price of the compromise is a pledge to spend less taxpayer money in the future. It’s kind of like the terms of a loan: If you want to borrow $10,000 today, you have to promise to repay that $10,000 with interest in the future. (Although, as I noted above, the fact that borrowing would remain high means Washington is still acting like the loan shark in this situation.)

Finally, it’s good policy and good politics because it sets a precedent in which cutting spending is necessary. That’s good policy because our problem will spiral out of control otherwise. And it’s good politics because, as others have noted before, we need a system in which politicians compete to spend less of our money, not more.

– By Kyle Wingfield

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205 comments Add your comment

Hillbilly Deluxe

May 10th, 2011
9:57 am

This is a good idea, in my opinion. Many times over the years, we’ve been through much the same thing. What usually happened before is that they raised taxes but the spending cuts never materialize. WHen it’s all said and done, thet’ll raise the debt ceiling, it’s just a matter of what kind of deal is cut.

retiredds

May 10th, 2011
10:02 am

Kyle, I don’t disagree with much of what you have to say here. But, would you please tell your readers, honestly, that if the USA were to default on its Treasury bond, notes, and and bills what that will mean for their investments, savings, home values, etc. My position is the American public has very little or no understanding of what a US default would do to the stock, bond, and real estate markets. And the politicians who believe a default won’t have an impact are either delusional or just plain stupid. Let me just say, they (investments of all kinds) won’t increase in value. If you can refute may statement have at it.

Halftrack

May 10th, 2011
10:16 am

Kyle; They need to do something that is significant and substantial. Citizens like the old service station add “pay me now or pay me a lot more later”, is what the Nation is facing. The late part is very disasterous to all our welfare. The journey of a thousand miles begins with one step. It’s now time to begin our cuts.

Kyle Wingfield

May 10th, 2011
10:21 am

retiredds: I won’t refute your statement. That said, failing to raise the debt ceiling does not necessarily mean defaulting on the debt. We take in far more money in tax revenue each year than we owe in interest payments. So, even without raising the debt ceiling, Washington could avoid default.

Would that maneuver cause pain of its own? Of course. I’m just pointing out that there are options.

Dirty Dawg

May 10th, 2011
10:38 am

Hey Kyle, you simpleton. Your argument about not defaulting on debt is the same one that that brilliant financial expert Sarah Palin offered about this, or was it Bachmann…either way it’s idiotic.

The problem isn’t default it’s how the ‘good faith and credit’ of the US will be viewed by the rest of the financial world…and what price we’ll pay for that…and what reaction the financial markets will have. Sure we’ll still have money coming in, but everything will cost more – interest rates you know ‘ and whatever passes for recovery momentum will be lost…hell, for all we know, the sky will fall. Jerk!

Kyle Wingfield

May 10th, 2011
10:43 am

And if we are still meeting our obligations on our debt, we’ll still be upholding the full faith and credit of the government.

You haven’t offered an explanation to the contrary.

aldol

May 10th, 2011
10:46 am

Boehner the “weeper” will certainly not be audacious enough nor aggressive enough.
This struggle over the debt will continue for years until the democrats will self destruct with their economically disruptive policies. It is a fact that the democratic party today is not JFK’s party, it is a concoction of special interests, bough for with taxpayers money. As taxpayers cut the money, there will be less and less of what they need to purchase the mercenaries. Hence the implosion. It may take a few more years but it is inevitable

DannyX

May 10th, 2011
10:55 am

Question 14 from the same poll,

“14. Based on what you have read or heard about the discussions between Congress and Barack Obama on the debt ceiling, do you think the Republicans in Congress have or have not acted responsibly?

34% said YES
60% said NO

retired early

May 10th, 2011
10:58 am

I am all for eliminating the deficit over time, but this is not the time. The “debt commission’s” bipartisan recommendations should be the plan to lead the way, not the GOP strategy to “NEVER” allow tax increases, thereby requiring budget cuts alone, to balance the budget…that old Grover Norquest idea of “shrinking government to the size where it can be drowned in a bathtub”. When one looks back to the Bush years, where two wars were unfunded…when a tax cut costing 2 trillion over a decade now was not “offset” by budget cuts as Boehner is now demanding and when a 500 billion dollar medicaid drug bill was unfunded…one has to believe the deficit was the GOP’s “last priority. Now that Obama is President, Boehner is suddenly becoming “fiscally responsible”.
Remember…Boehner, Cantor and company were all in the House during those Bush years, so the word that comes to my mind, Kyle, is “hypocrite”…not the words you have used to describe the Speaker. How else can you describe their actions.
Again, I am all for cutting whatever is necessary…and…eliminating the tax cuts as well, to realistically attempt to balance the budget….not just use this most” current crisis” to make “political hay” as Boehner is doing, at the risk of bankrupting this country.
You see a hero…I see a man who is “Party first, Country Second”.

retiredds

May 10th, 2011
11:00 am

So my question is: if the US doesn’t default by paying interest on its security obligations, what doesn’t get paid? And this is what also needs to be put out there for the American people to see. I think you will agree it is not just as simple as saying, “well, we are saving the ‘good faith and credit’ of the US. There ain’t no free lunch.

I have an idea, how about they (the Congress) don’t pay into their retirement funds or their well funded medical and retirement benefits packages.

retiredds

May 10th, 2011
11:03 am

Retire early: I tend to agree with you about the deficit/debt commission. But the Republicans can’t go with that because it would be an Obama program and we all know that the Republicans have been and will do everything (including lie, steal, and beg) to make Obama a one-term president. Therefore the party of “no” will continue to supply us with their obstructionist and failed economic panaceas.

Kyle Wingfield

May 10th, 2011
11:04 am

retiredds @ 11:00: That’s the $400 billion question. As I said before, there would be pain, just of a different sort.

I think we both know congressional retirement and medical plans don’t cost $400 billion a year.

Cutty

May 10th, 2011
11:12 am

You may be meeting your obligations, but the stock market would go into a tizzy. The market rises and falls if someone in Iraq farts the wrong way. To think that there wouldn’t be significant damage to the economy if we ‘technically’ defaulted is laughable. The Bush administration raised the debt ceiling 7 times, matching spending cuts from these same group if GOP leaders was nonexistent. Until military spending, and yes modest tax increases, are put in the table this is mere politics.

Name one business in a financial bind that only cuts spending, and doesn’t look at all of ways to increase revenue?

retired early

May 10th, 2011
11:23 am

retiredds

Anything that gives Obama credit is automatically opposed by the GOP. You saw that when Obama embraced the GOP bill promoting small business loans only to have them pull their support once he was on board. The term “Party, First Country Second”, perfectly describes the current GOP leadership.
I can only imagine what this country would look like after 8 more years of GOP control. Georgia is headed back to the “old South” under the same GOP mindset, let’s hope voters finally see thru the “smoke screen” that keeps them voting against “their own best interest”.

Kyle Wingfield

May 10th, 2011
11:33 am

Cutty: Name one business that can increase revenue at will, regardless of whether its “customers” approve.

yuzeyurbrane

May 10th, 2011
11:34 am

Kyle, where did you and Boehner get your degrees in economics. No reputable economist (that, by definition excludes the paid hacks at the Heritage Foundation) sees any economic sense at all in risking the full faith and credit of the U.S. for a cheap political stunt. If you don’t like the policies of this govt. then introduce legis. on the merits and take a vote. You and your buds prefer to extort the rest of us because you know you would lose any debate on the merits. For one reason, you are too ignorant about economics to even understand what the merits are.

Logical Dude

May 10th, 2011
11:35 am

Kyle: And if we are still meeting our obligations on our debt, we’ll still be upholding the full faith and credit of the government.

You are (for some unexplained reason) brushing off the threat of “the full faith and credit of the government” by saying we can pay the debt. Oh sure, we can pay the debt if we ignore much of the current spending.
What 25% of the government spending would YOU choose to stop paying in order to pay the debt?
And when you stop paying 25% of the government spending, watch how quickly the economy grinds to a halt anyway. 25% of the government out of work, 25% of sub-contractors to the contractors etc etc etc.

Come on now. Give us a real idea of the consequences. Don’t brush it off sounding like it’s “just a little pain”.

Road Scholar

May 10th, 2011
11:41 am

Boehmer was asked on Today what evidence did he have that the tax cuts for the rich had on the deficit and economy.

Crickets…

Boehmer changed the subject! And the interviewer let it go. Matt Lauer needs to grow a pair!

JohnnyReb

May 10th, 2011
11:42 am

Kyle, good article. Please only drink bottled water while at the AJC offices. Something there turns people Left; be on guard.

retired early

May 10th, 2011
11:45 am

Kyle

Since you are on board here praising the Speaker, please tell me how you rationalize the contradiction of his having approved the numerous unfunded budget increases during the Bush years…not mandating budget cuts to “offset” those same increases…and now his “line in the sand” demand for “offsetting” budget cuts to reduce the debt ceiling. He went along 7 times under Bush without objection. Please explain how this is somehow “different”.

Painful Truth!

May 10th, 2011
11:45 am

“Name one business that can increase revenue at will, regardless of whether its “customers” approve.”

Lets start with the Airlines..
Next we will move to the Oil companies..
The Big banks are another ….

Kyle, Do I really need to continue???

Swami Dave

May 10th, 2011
12:01 pm

retired early:

America does not have a problem of too-little revenues; America has a problem of too many dependents expecting to live off those revenues instead of providing for themselves. There is no reason to increase taxes. That idea has been merged with all of the other historical “deficit reduction compromises” (read: scams) that have been done in the past few years.

Tax increases occur immediately – spending cuts promised for the “out-years” never to materialize. The dependency class continually clamouring for ever-increasing programs and transfer payments funded by the confiscated wealth of America’s taxpayers.

Respectfully, no more!

Honestly, I would support Boehner and the Republicans compromise on a requirement for 50% of the debt ceiling increase to be offset by real spending cuts in discretionary spending IN THE CURRENT BUDGET YEAR! I’d accept half of the spending cuts in exchange for the likelihood that they are actually REAL and not promised like fantasy land in the future (awaiting either removal by or outright refusal to carry out by future Congresses).

Net-Net: We have a spending problem and the way you resolve a spending problem is quit spending. Our spending problem is too many Americans expecting others to fund their lifestyles and decisions instead of providing for themselves.

Freedom and Opportunity work every time they are tried; they work when you do!

-SD

Kyle Wingfield

May 10th, 2011
12:02 pm

Logical Dude: 25 percent of “government spending”? How much do you think we spend on debt service?

The president’s 2012 budget proposal calls for net interest payments of $242 billion out of total spending of more than $3.7 trillion. That’s 6.5 percent of “government spending.”

Maybe you meant only discretionary spending — meaning entitlements aren’t touched. If so, we’re talking about nearly 18 percent. I never called that “just a little pain,” your mischaracterization notwithstanding. But anyway, let’s not forget that the president’s budget takes stimulus-level spending and bakes it into the budgetary cake; he’s proposing a budget for 2012 that is more than $700 billion above the pre-stimulus (i.e., FY 2008) budget.

Where is it all going? Here are some broad categories: $23 billion more for Energy; $9 billion more for Natural Resources and the Environment; $27 billion more for Transportation; $2 billion more for Community and Regional Development; $35 billion more for International Affairs; $5 billion more for General Science, Space and Technology; $11 billion more for Administration of Justice; $11 billion more for General Government.

Right there, that’s $123 billion in *increases* from FY 2008. That’s before we even have to talk about reducing what we were spending just four years ago, and before we touch defense or entitlements.

retiredds

May 10th, 2011
12:04 pm

Kyle, you are right there would be pain. But my position is this: not one Republican will tell the American people just where that pain will be felt (my guess is they don’t know because the ideology clouds the particulars). If a politician, Republican or Democrat, says that there will be minimal impact from a default, they are either ignorant of fiscal and economic dynamics, and the dynamics of the global markets for stocks and bonds (gold would probably go over $2,000/ounce, or they would be willing to wing it as happened under the Bush adminsitration, i.e. VP Cheney saying that deficits don’t matter and much of the two wars being run off budget so the American people couldn’t see the economic and fiscal impact, and cutting taxes while trying to fund the two wars (economics 101 tells us that doesn’t work).

And, quite frankly, if the Republicans tell the American people that deficits and debt can be done only on the expense side of the ledger, they are either fools or liars. It can’t happen, and, Kyle, you know that too.

Kyle Wingfield

May 10th, 2011
12:04 pm

Painful Truth: You don’t think people fly less when airlines raise prices, have been driving less with gas prices higher, etc.? Or that an individual airline doesn’t lose customers when it raises its fares…and so on?

Kyle Wingfield

May 10th, 2011
12:12 pm

Anyway…all this default talk has gotten us off-topic a bit. The real question before us is whether Boehner’s plan for accommodating our borrowing needs — by cutting spending to equal increases in the debt ceiling — is better than the Obama/Democratic plan of “just raise it, baby.”

Swami Dave

May 10th, 2011
12:13 pm

Painful Truth:

You dont have to fly. You dont have to drive. You can keep your money in cash in your mattress. Those sound like choices – albeit ones that -I- dont want to make. However, they are a choice that you have. There is no force requiring you to buy their products or use their service.

Noone will show up at your house if you refuse to schedule a flight on Delta and pay $250 for the ticket.

They put you in jail or confiscate what you own if you choose not to pay your taxes. In the case of Government, you are required to FUND their products and services at whatever level that they assess based on the fact that you exist. They have the full force of the government to enforce your compliance.

I guess that you should continue because you have yet to make an accurate comparison that answers Kyle’s challenge of identifying a business that can “raise revenue” at will forcing you to buy it (i.e. mandating compliance).

Thanks for playing.

Truth, History, and Common Sense refute Liberalism!

-SD

Michael

May 10th, 2011
12:16 pm

How come the current democratic president must fix what it took about fifty years of government largesse to break? By the way, don’t raise the debt limit because I love chaos. I tire of stories of gloom and doom and just want to see, realize and feel it. Break this country down into its component parts with states, counties and cities competing against one another for taxpayers and industries. Our final steps towards becoming that third world country where we have an oligarchic rich class with a sham representative governing body.

For Real

May 10th, 2011
12:20 pm

Kyle, you are answering a question with a question.

Mike

May 10th, 2011
12:22 pm

Boehner is a idiot. He is own by big oil companies. All he knows is how to cry and he is good at time. Kyle, if you want to write about something, write about all the jobs that Boehner promised when the Republicans took control of the house. As I am typing this post, the Republicans have been in control of the house for 125 days, 11 hours and 19 minutes and they still haven’t come up with a jobs bill.

For Real

May 10th, 2011
12:22 pm

“Anyway…all this default talk has gotten us off-topic a bit. The real question before us is whether Boehner’s plan for accommodating our borrowing needs — by cutting spending to equal increases in the debt ceiling — is better than the Obama/Democratic plan of “just raise it, baby.” – Okay, you are right we are slightly off topic. However, retiredds’s 11:45 question about how Boehner’s current plan meshes with the 7 times Boehner raised the ceiling without any cuts.

JRev

May 10th, 2011
12:22 pm

Apparently it’s OK to explode the debt ceiling as long as a Republican is President, as far as the GOP is concerned. Our debt soared under Bush and the GOP did nothing. No proof has been given to back up the assertion that keeping taxes low for the richest Americans benefits our economy in any way. If we get rid of the Bush tax cuts, we will be much closer to the road to recovery. But, the GOP doesn’t want to admit this. This is not economics Kyle; it is politics. The GOP are hedging their bets that they can win votes through this sham, and they might just do it. America will be much worse off if we continue these tax cuts for the rich.

Lil' Barry Bailout

May 10th, 2011
12:22 pm

The debt ceiling should be raised just enough so that we get to have this debate again just prior to the 2012 election.

Painful Truth!

May 10th, 2011
12:23 pm

Come on Kyle..thats not what you intial question was…You are doing a pretty good Boehner immitation dancing around youu own question. Your question was ” Name one business that can increase revenue at will, regardless of whether its “customers” approve.”

Add to the list….
Sony
Apple
All of the major Drug companies…

Do I need to continue….

onpatroll

May 10th, 2011
12:27 pm

Would you need to raise the debt ceiling if the Rs would have let the Bush tax cuts expire when it was time to in the first place? I see nothing wrong with cutting spending but I also see fault in refusing to let those tax cuts expire. Technically that’s not a tax increase in my opinion when they have an expiration date attached. It was a tax break that has run its course.

Lil' Barry Bailout

May 10th, 2011
12:29 pm

Yes, you need to continue because none of the businesses you named can force people to purchase their products.

Try again.

George P. Burdell

May 10th, 2011
12:30 pm

Kyle:

You make a great point that I think politicians on both sides are trying to gloss over. Namely, all the future budgets have just baked the nearly 18% one time increase from 2008 to 2009. Why long term that is accepted as a normal adjustment in spending is ludicrous. I think it plainly illustrates that even combining debt ceiling increases to spending cuts as proposed may not be enough. At least that level would get us close to increasing expenditures from 2008 levels at the same rate revenues have increased historically. I don’t think this stands a chance politically but at least they are having the discussion.

Painful Truth!

May 10th, 2011
12:32 pm

Again, Swami Dave, That was not the question…His challenge was to name a business that can increase revenue (Raise prices) regardless of whether its customers agree…. Not to you point, You are right…Juvenille, but right, as a business person, I wont go to jail if I dont fly, but I also cant effectively do my job if I dont. And yeah, we can all ride bicycles instead of driving cars, but tell me, where would our economy be then??? And in case you forgot, look back about 3 years and see what happens when the fall short short…. But alas..that might mean actually having to admit that they top down idea will only serve to crush the supports that hold it up….

Painful Truth!

May 10th, 2011
12:37 pm

Bailout boy…See my 12:32…

retiredds

May 10th, 2011
12:38 pm

Kyle, it is not “just raise it baby” that is the Democratic position. The position is to have a clean passage and take up the budget deficit and debt issues on a parallel track. Let’s face it it has taken the US many decades to run up the debt, and it will take many decades to reduce it (I hope to zero). We had a great opportunity following the Clinton years and it was blown to bits in a very short time. Think of it if Bush and his cronies had continued the fiscal path we were on. In the year 2000 the conversation was that the debt might be paid off in 10 years if the same rate of surpluses could be continued. What a wasted opportunity. And by whom, did your Republicans say no to the change of direction in deficit spending or the debt. NO, they waited until Obama was elected and then went on a tear. Kyle, since that time I do not trust anything the Republicans tell us. Their hypocrisy is more than monumental. The R’s tell us that all Democrats want to do is “tax and spend”. Well, all the Republicans wanted to do was “borrow and spend”. The latter is worse in my mind because the debt service on the borrowing has now become a huge part of the debt.

My position has been that I don’t think the Congress is capable of doing this right. They are too beholden to their voting bases, special interest groups, and those who have the means to purchase meaningful time with their legislatures. I think the ideology driven politics will continue to be the demise of any constructive and beneficial reform. Don’t forget all empires ended because of decay within.

JIM

May 10th, 2011
12:40 pm

Swami Dave
How about utilities, they raise their rates without your approval. Of course you don’t have to use them and they won’t put you in jail if you refuse to pay but try telling your wife and kids they will have to do witout airconditioning this summeer when it’s 95 degrees outside. It’s easy to throw out extreme scenerios but you know as well as i do that there are some things that are necessities that it would not be concidered illegal if you choose not to purchase them.

Lil' Barry Bailout

May 10th, 2011
12:44 pm

Try again, PT, because your earlier attempts failed.

JustWondering

May 10th, 2011
12:45 pm

Kyle,
This comment, and later questions, does expand some on your question. Generally, every household, business, organization and governmental body has both revenues and expenditures (other than in bankruptcy). In 2001, the Federal Tax Table for MFJ has a top tax rate of 39.1%. An individual with income of $372,950 would face federal income taxes of $117,867. On the 2009 Tax Rate Schedule,the top rate is 35% and the same person with taxable income of $372,950 would pay $100,895. All the rates are lower in 2009 than in 2001. In addition, there are tons of adjustments and tax credits that have also been added to the IRC. In discussion about the annual deficits and the current debt ceiling, what happened to all the growth in federal revenue predicted when these cuts were put in place? Second question regards proposed cuts in spending being considered. What segments of the US population will be most ‘impacted’ by the cuts? Will it retired persons, young couples starting a family, corporate CEO’s, middle management, blue collar workers, professional athletes, etc.

Lil' Barry Bailout

May 10th, 2011
12:46 pm

The Democrat position is to continue punting so they can continue their Idiot Messiah’s un-American spending spree.

Lil' Barry Bailout

May 10th, 2011
12:48 pm

What segments of the US population will be most ‘impacted’ by the cuts?
——–

The segment that demands that others pay their bills for them.

scrappy

May 10th, 2011
12:48 pm

Only thing I agree with is, Yes, this is good politics.

The R’s want the debt ceiling increase just as much as the D’s, and they too know (or are just plain stupid) that the consequences on the market would be horrific. But this way they get to create talking points and shout out to their base about how fiscally responsible they are trying to be, but the those darn democratics just won’t let them.

onpatroll

May 10th, 2011
12:50 pm

Kyle’s 11:33 question – did you just ask this to be mean or really want an answer because you don’t know of any? Here’s one, Southern Company.

Lil' Barry Bailout

May 10th, 2011
12:52 pm

The debt ceiling has zero impact on “the market”. Not increasing it would only impact current holders of US debt, and that’s only if your Idiot Messiah stiffs them, instead of cutting off the parasite class from their handouts.

Painful Truth!

May 10th, 2011
12:52 pm

Bailout boy…The segment that demands that others pay their bills for them.

yeah..Like Boeing, Or KBR, or Lockeheed-Martin,

scrappy

May 10th, 2011
12:53 pm

“Democratic plan of “just raise it, baby.””

As opposed to the Repub plans:
just spend it, baby
just invade it, baby
just cut taxes, baby
just cuz I say it, its true, baby