House Speaker John Boehner, R-Ohio, on Monday said the federal budget should be trimmed by trillions of dollars, at least enough to cover any additional borrowing the government would do if Congress agrees to raise the nation’s debt limit. Speaking before the Economic Club of New York Monday night, Boehner set the marker for congressional Republicans in financial negotiations with the White House. He signaled that only major budget changes that reduce the nation’s staggering deficit and debt will be enough to get Republicans to agree to raise the debt ceiling before it’s reached in July.
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“Without significant spending cuts and reforms to reduce our debt, there will be no debt-limit increase,” Boehner warned.
Congress and the White House this week begin a new round of negotiations over the budget and the debt ceiling. Lawmakers met with Vice President Joe Biden to discuss their differences and will meet again Tuesday. Senate Republicans and Democrats are scheduled to meet separately with President Obama this week.
Just a week remains before the $14.3 trillion debt ceiling is reached, but Treasury Secretary Tim Geithner said the discovery of additional tax revenue will prevent the government from defaulting on its legal obligations until July 2. Geithner has said the debt limit must ultimately be raised by about $2 trillion to keep the government solvent through 2012.
Without speaking directly to each other, both congressional Republicans and Democrats on Monday staked out vastly different positions on next year’s budget and did not appear to leave much room for compromise.
In a conference call with reporters, Senate Democratic Caucus Vice Chairman Charles Schumer, D-N.Y., said Congress would be unable to strike a deal on spending cuts unless the plan includes raising revenue through new taxes.
“That will be impossible to achieve,” Schumer said of the GOP’s plan.
But tax increases are a non-starter for Republicans, who say they will undermine the economic recovery and kill jobs and, in turn, make it harder to shrink the deficit.
“The mere threat of tax hikes causes uncertainty for job creators,” Boehner told the Economic Club. “Uncertainty that results in less risk-taking and fewer jobs. If we’re serious about balancing the budget and getting our economy back to creating jobs, tax hikes should be off the table.”
When it comes to budget cuts, however, Boehner said “everything is on the table,” including changes to Medicare.
Democrats are willing to support cuts, though far less than Republicans want. They endorsed creating a trigger that would enact spending cuts and tax increases if the deficit reaches a certain level.
Boehner, however, said he was unwilling to support “short-term fixes that do little right away, and end up making things worse over time.”
The last time Congress enacted a deficit trigger was in the 1980s and Congress largely ignored it.
Boehner did not make clear exactly how far the GOP would go to block a debt-ceiling increase if they do not achieve the desired amount of cuts.
In his speech, Boehner acknowledged it would be “irresponsible” not to raise the debt ceiling, but added that it would be “massively irresponsible” to raise the debt ceiling “without simultaneously addressing the drivers of our debt.”
Schumer said Congress needs to come up with a deal by July 15 in order to prevent the financial markets from panicking over the prospect of the government hitting the debt ceiling.
