On Monday, Sen. Lindsey Graham (R-SC) conceded that Congress will find new revenues to avert the tax increases that are part of the so-called fiscal cliff in January, but predicted that Republicans won’t raise the nation’s debt ceiling unless President Obama agrees to fundamentally reform Medicare and Social Security.
Appearing on Fox News, Graham put forward an argument that is quickly becoming Republican conventional wisdom: Obama has leverage when it comes to raising tax rates, but once Republicans agree to some sort of a deal, the power will shift to the GOP. A growing number of Republicans now believe that after compromising on tax rates, the party will have the leverage and credibility to hold the nation’s borrowing limit hostage in order to force deep cuts to entitlement programs:
GRAHAM: In February or March you have to raise the debt ceiling. And I can tell you this, there is a hardening on the Republican side. We’re not going to raise the debt ceiling. We’re not going to let Obama borrow any more money or any American Congress borrow any more money until we fix this country from becoming Greece. That requires significant entitlement reform to save Social Security from bankruptcy and Medicare from bankruptcy. Social Security is going bankrupt in about 20, 25 years. Medicare is going bankrupt in 15 or 20 years. [...]
Yes, we will play that game, Mr. President, because it’s not a game. The game you’re playing is small ball. You’re talking about raising rates on the top 2% that would run the government for 11 days. You just got reelected. How about doing something big that is not liberal? How about doing something big that really is bipartisan? Every big idea he has is a liberal idea that drowns us in debt. How about maning up here, Mr. President and use your mandate to bring this country together to stop us from becoming Greece.
Toying with the debt ceiling will come at great economic cost. In 2011, Republican demands nearly led to a credit default and ultimately cost taxpayers “$18.9 billion over 10 years, due to elevated interest rates between January and August 2011.”
Graham’s alarmism about the nation’s entitlement programs is also greatly overblown. As the Washington Post pointed out on Monday, the nation’s social programs will be stressed as the babyboomers retire, but they won’t become bankrupt. Actuaries predict that Medicare Part A — the fund that covers hospital visits — would become exhausted by 2024, but the government “could still cover 87 percent of estimated expenses” in that year. Similarly, Social Security won’t face challenges until 2033 and can be addressed by lifting the “current payroll tax cap, which exempts wages in excess of a certain amount ($110,100 this year) from the tax.”