Fresh off a last-minute deal to avert the so-called “fiscal cliff,” the combination of spending cuts and tax increases that was supposed to take effect at the beginning of the year, Congress now has another fiscal issue at hand: the nation hit its borrowing limit on New Year’s Eve, and the debt ceiling needs to be increased to avoid a default that would have catastrophic economic consequences.
Republicans are already promising a repeat of the summer 2011 fight that nearly led to such a default (and ultimately created the fiscal cliff). Senate Republicans have promised to hold the debt limit hostage for spending cuts, and House Speaker John Boehner’s (R-OH) office has indicated similar intentions. “If they want to get the debt limit raised, they are going to have to engage and accept that reality,” Brendan Buck, a spokesperson for Boehner, said of spending cuts.
But in the winter of 2011, before he led the GOP into the fight that caused the first credit downgrade in American history, increased borrowing costs, and nearly led to a default, Boehner proved that he knew the consequences of not raising the debt limit: it would cause “financial disaster” for the entire world:
Boehner said it would mean “financial disaster” for the global economy if Congress were unable to come to a deal to raise the debt ceiling this spring.
“That would be a financial disaster, not only for us, but for the worldwide economy,” Boehner said on “Fox News Sunday” of the risk of default. “I don’t think it’s a question that’s even on the table.”
Before 2011, raising the debt ceiling was a matter of course, one the minority party often used to embarrass the president before it ultimately allowed the increase. The current crop of Republican leaders voted repeatedly to raise the debt limit under President Bush. Only now have Republicans begun to insist on spending cuts equal to the amount of the debt increase, a policy that is hardly sensible, since the debt limit simply grants the U.S. Treasury the authority to borrow to pay the debts Congress has already accrued and does not authorize new spending. Failure to grant Treasury that authority, as Rep. Jeff Flake (R-AZ) said in 2002, would be “like eating a big meal and walking out on the bill,” except that walking out on this bill, as Boehner himself said, would cause a global financial catastrophe. (HT Greg Sargent)