In 2010, House Republicans took the nation to the brink of a debt default due to their intransigence on taxes, refusing to raise the debt ceiling without receiving spending cuts in return. When Standard & Poor’s downgraded the U.S. credit rating, it pointed to the fact that Republicans had resisted any increase in revenue.
At the time, Republicans demanded spending cuts equivalent to the amount the debt ceiling would be increased; while they didn’t get that, they did receive cuts that cost about one million jobs and lowered economic output by about 2 percent. Now, with another debt ceiling increase necessary in early 2013, House Majority Leader Eric Cantor (R-VA) is already taking it hostage again, demanding entitlement cuts in return for ensuring that the nation doesn’t default on its debt:
Resolving the issues surrounding the fiscal cliff, especially the replacement of the sequester, and the next debt limit increase (likely necessary in February) will require that the President get serious about real entitlement reform. While it is unrealistic for us to expect the President to embrace our vision of Medicare reform or Obamacare repeal, it is equally unrealistic for the President to continue to insist that Obamacare is off the table, or that Medicare and Medicaid require nothing more than some additional provider cuts. We will measure entitlement savings on the basis of whether they are sustainable and whether they actually bend down the cost curve.
Keeping the U.S. from exceeding its debt limit doesn’t allow for new spending; it just ensures that the U.S. will faithfully pay its bills. Taking it hostage unnecessarily harms the economy, as this chart shows:
Speaker of the House John Boehner (R-OH), meanwhile, opened negotiations over the so-called “fiscal cliff” yesterday by marching out the same sort of tax plan that Mitt Romney embraced and that Boehner tried to push for during the 2010 debt ceiling debacle.