Jewish World Review May 18, 2011 / 14 Iyar, 5771
A winning GOP debt gambit
By Dick Morris And Eileen McGann
http://www.JewishWorldReview.com | Here's how the House Republicans can pull the rug out from under the Obama administration's strategy of threatening them with government default if they don't agree to a $2 trillion increase in the debt limit:
House Republicans should pass legislation conditionally raising the debt limit by a small amount — 100 billion or 200 billion — with the borrowing authority to be used only in the event that the Treasury Secretary certifies that it is necessary to avoid default on our credit obligations and that the funds borrowed under this authority will only be used for debt service payments, not for government operating expenses.
As the House Republicans face off with the Obama administration over the debt limit, they should take care to separate a government shutdown — which the country would accept for a short period of time in a battle to cut government spending — and a credit default, which nobody would accept and must never happen. The strategy of the Obama administration is, of course, to merge the two possible outcomes of a deadlock and to argue that we must protect the full faith and credit of the United States.
Of course, a debt default — even of short duration — would be horrific and destabilizing. And, of course, it is unnecessary. With Washington taking in $2.2 trillion in tax revenues annually, it can easily afford $250 billion in debt service without resorting to borrowing. The borrowing is needed to finance government spending, not debt service. Sen. Pat Toomey, R-Pa., has made this same point extensively, and he is quite correct.
But if the GOP holds firm in demanding big spending cuts in return for raising the debt limit, the administration will lambast the Republicans for pushing the U.S. toward default.
Republicans should call his bluff by conditionally raising the debt limit only by as much as might be called upon to satisfy the next few months of debt service.
Such legislation is, of course, unnecessary. Not only does the government have more than adequate revenues — without borrowing — to avoid default, but the treasury secretary has a duty to use these revenues to do so. But in the media war over the debt limit, the Treasury Department has and will succeed in spreading the impression — however false — that Republican obstinacy is imperiling the nation's credit. The echo chamber of banks and global financial institutions will repeat this mantra until it becomes the accepted national wisdom.
Confronted with such opposition, there is no reason to suppose that House Speaker John Boehner will show any more courage over the debt limit than he displayed in the continuing resolution battle earlier this year.
But with an explicit bill authorizing borrowing to pay debt service, the prime administration argument against the Republicans is made moot. There is no need to accept the word of Republicans that borrowing is not needed to meet debt service. Borrowing will be explicitly authorized for this purpose.
If the Senate refuses to pass this limited expansion of the debt limit, the blame for any ensuing default will rest squarely on the Senate Democrats and the administration. Their little game will be exposed for the fraud that it is.
If Republicans trigger a government shutdown — even if it involves a temporary halt to Social Security payments and troop salaries — Americans will accept it. They know that we are deeply in debt, and they agree with former candidate Mike Huckabee that appealing for an increase in the debt limit without reining in spending is like begging credit card companies for an increased line of credit when one is already maxed out and overextended.
But default is scary and dangerous. The administration will succeed in staring down the GOP if the issue is default. But an amendment — even a one-house amendment — conditionally raising the debt limit blocks President Obama from implementing his chosen strategy.
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© 2009, Dick Morris