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Republicans have made reducing the deficit their cause célèbre, but a failure to boost the debt ceiling could make the GOP’s policy goals that much harder to accomplish.
Without a debt limit increase by the Treasury’s Aug. 2 deadline, budget experts say the country’s budget woes could actually get worse by raising borrowing costs.
“Paradoxically, not raising the debt limit could make the deficit worse,” said Jerome Powell, a former Treasury official in the George H.W. Bush administration and now a visiting scholar at the Bipartisan Policy Center.
Republicans, in particular, could suffer in two ways: They could lose their leverage to force spending cuts that might reduce the deficit, and they are likely to take the political hit for the higher interest rates that would follow an unwillingness or inability to raise the debt ceiling.
Senate Minority Leader Mitch McConnell (R-Ky.) acknowledged as much in a Wednesday radio interview on the “Laura Ingraham Show.”
“The reason default is no better an idea today than when Newt Gingrich tried it in 1995 is that it destroys your brand and would give the president an opportunity to blame Republicans for a bad economy,” McConnell said.
It appears that calculus was behind McConnell’s decision to unveil a Plan B that would essentially put the burden of raising the debt limit on President Barack Obama. Under the plan, Obama would get the authority to raise the debt limit in three installments, unless Congress passes a resolution of disapproval and can overcome a presidential veto with a supermajority. The proposal would also require Obama to propose spending cuts, but the debt ceiling increase would take place regardless of whether Congress enacts the cuts.
Part of McConnell’s — and Speaker John Boehner’s (R-Ohio) — problem is that some of his rank and file are dubious of the Treasury deadline. But those Members are also the ones who have seized on the issue of deficit reduction as a politically winning one. Several freshman Senate Republicans have argued that Democrats and the White House have resorted to scare tactics to win over public opinion.
“I am a little bit cynical about the scare mongering and putting America’s back up against this Aug. 2 deadline just to get an increase in the American credit card,” Sen. Ron Johnson (R-Wis.) said Thursday.
Johnson’s attitude is shared by several other freshmen, including House Republicans who won their seats in a wave election based on cutting Washington spending, which they believe is out of control and weighing down the economy.