So House Speaker John Boehner went to Wall Street (the Economic Club of New York, to be exact) and delivered a speech announcing that he won’t support a debt limit increase unless it is connected directly to spending cuts that equal the amount of increased debts. Tax increases, of course, are off the table.
Dave Weigel explains exactly how that shifts the debt limit debate to the Right:
The inside-outside game continues. Boehner gets to play the reasonable moderate who merely wants a debt limit increase with huge spending cuts or caps that House Democrats say they won’t accept. The Michele Bachmanns of the party get to keep opposing any increase, ever, for any reason. The White House stands pat and settles for whatever Republicans and the Senate Democrats who are up in 2012 — McCaskill, Klobuchar, the Nelsons — come up with.
Meanwhile, Sen. Jim DeMint, who is sitting athwart a critical 2012 presidential primary state and has a large Tea Party following, has issued his own demand that anyone who wants to run for president has to endorse a balanced budget constitutional amendment–and apparently, a version that limits federal spending to a fixed percentage of GDP–as a precondition for a debt limit increase.
Barring some significant defection of Senate Republicans willing to support a tax increase–or at least a “tax reform” package that actually raises revenues by closing off loopholes–the only way out of this box is some sort of gimmicky “agreement” that provides future procedural mechanisms to force deficit reduction without specifically identifying the means for achieving it. But Boehner’s speech didn’t seem to leave much room for that option. And his taxes-off-the-table line increases the deficit reduction target necessary to satisfy his demand, since current deficit estimates include expiration of the Bush tax cuts.
Ezra Klein suggests it’s the rejection of procedural solutions to the immediate crisis that could trigger a real crisis:
Boehner’s got a big [deficit reduction] number, but it’s not, over time, an impossible number. All of the major long-term budgets cut and raise more than $2 trillion over the next 10 years, so Boehner’s demands, though impressive in the abstract, are actually in the center of deficit-reduction consensus. What’s more questionable is his timetable. It’s very unlikely that Congress will be able to cut a multi-trillion dollar deal on deficit reduction before early-August, when the Treasury runs out of financial gimmicks to delay a default. And if Boehner and the Republicans won’t accept fiscal rules as a downpayment on deficit reduction, that leaves us with few options save for a series of hard-to-negotiate, short-term increases in the debt ceiling — which is to say, an extremely extended period of uncertainty for the market.
Meanwhile, the Wall Street Journal editorial board has laid out the new economic conservative talking point that financial markets really care more about spending cuts than about a debit limit increase:
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.
This is at best a disingenuous bargaining ploy, and at worst (to use a technical term) a lie, but one that will probably be repeated very soon by Republican pols around the country.