At a speech on Monday night at New York’s Economic Club, House Speaker John Boehner will make clear what’s necessary to raise the government’s borrowing limit, a pressing concern on the minds of the many financiers who will be in the room: Spending cuts equal to the size of the debt-limit increase.
Boehner’s speech comes as Washington grapples with the urgent need to raise the government’s borrowing limit, which will be reached on May 16. When the limit is reached, Treasury officials estimate they can avoid a default on government bonds through early August, but a failure to increase the limit by then—or even the perception that such a failure could occur—will send shock waves through the financial market and negatively impact the economy.
“It’s true that allowing America to default would be irresponsible," Boehner says in remarks prepared for delivery. "But it would be more irresponsible to raise the debt ceiling without simultaneously taking dramatic steps to reduce spending and reform the budget process."
“The cuts should be greater than the accompanying increase in debt authority the president is given.… They should be actual cuts and program reforms, not broad deficit or debt targets,” added Boehner.
With members of Congress discussing an increase as large as $1 trillion or $2 trillion, which would see the government through the next two years, the deal Boehner proposes would entail massive, multi-year cuts—or a series of smaller, short-term debt-limit increases linked to more manageable spending cuts.
Republicans have made clear they expect spending cuts to accompany any debt-limit increase, but this is the first time the speaker has linked the size of the cuts and the borrowing rule. President Obama has called for a clean debt-limit vote, but White House officials have acknowledged that some kind of deal will be necessary to gather the votes, both Republican and Democrat, to pass a bill through both chambers of Congress.
Vice President Joe Biden will continue leading deficit-reduction talks aimed at resolving the impasse on Tuesday with members of Congress from both chambers and both parties.
Boehner will also tell his audience that everything from defense spending to major entitlement reform is on the fiscal table—except for tax increases, a major obstacle to a deal Democrats insist should include some kind of revenue raisers alongside spending cuts and entitlement reform. Congressional Democrats are focused on ending tax breaks for profitable oil companies, but in his speech Boehner will argue for the need to open up domestic oil reserves instead.
Boehner’s emphasis on long-term economic growth and willingness to talk about “trillions, not just billions,” suggests that he is aiming for a budget framework that will play out over several years, not just in fiscal year 2012, which begins in October.
“All too often, rather than providing long-term policies that will help our economy expand, government offers short-term fixes that do little right away, and end up making things worse over time,” Boehner says in his excerpted remarks.