“Stalwart” Ronald Reagan: Why Raising The Debt Ceiling Is Necessary
Let’s get real. What person in their right mind would really want the United States to default? Of course, nobody, yet over the years many members of Congress have voted against raising the debt ceiling.
Barack Obama did it and now rejects his own action. It is always a symbolic gesture that both Democrats and Republicans use, and use irresponsibly.
Yet now we seem to have the Tea Party, and a larger group of Republicans, clamoring for some kind of show down at the OK Corral. Not a symbolic gesture to some but a real threat. Not smart.
For those who like to cite Ronald Reagan in his 100th year as a stalwart, antidebt, no-tax-hike, no nonsense conservative, they have the wrong guy. Aside from his major tax increases as governor of California and as president here is a little history on the debt ceiling.
In a letter to then-Majority Leader Howard Baker on November 16, 1983, President Reagan asked “for your help and support, and that of your colleagues, in the passage of an increase in the limit on the public debt.”
Reagan went on:
…the United states could be forced to default on its obligations for the first time in its history.
This country now possesses the strongest credit in the world. The full consequence of a default–or even the serious prospect of default–by the United States are impossible to predict and awesome to contemplate….The risks, the costs, the disruptions, and the incalculable damage lead me to but one conclusion: the Senate must pass this legislation before the Congress adjourns.
The point is that Republicans should shelve using the debt ceiling vote as a means of negotiation. This is not a negotiable item. Should they take this right up until the 11th hour and refuse to fund the government, not only will Reagan’s admonitions come true but the Republicans will seal their fate as an irresponsible, minority party–a pariah for years to come.
Bad policy, bad politics.
By: Peter Fenn, U. S. News and World Report, May 19, 2011
Grave Consequences: Wall Street Tells John Boehner To Back Off The Debt Ceiling
Republicans are growing increasingly concerned about the impact a bruising fight over raising the nation’s $14.29 trillion debt ceiling could have on U.S. financial markets.
House Speaker John Boehner (R-Ohio) has had conversations with top Wall Street executives, asking how close Congress could push to the debt limit deadline without sending interests rates soaring and causing stock prices to go lower, people familiar with the matter said. Boehner spokesman Michael Steel said Tuesday night that he was not aware of any such conversations.
Treasury Secretary Timothy Geithner has warned Congress that without new borrowing authority, the federal government could hit the statutory debt limit by May 16.
Treasury could then implement emergency measures to continuing making interest payments on existing debt until around July 8. After that, the U.S. risks going into default, an unthinkable idea to many economists and market participants who say such an event could drive scores of large banks into failure, send interest rates skyrocketing as foreign investors abandon U.S. securities and crush the already slow-going economic recovery.
Republicans and even some fiscally conservative Democrats want to use the debt limit fight as leverage to wring more significant spending cuts out of the White House. Politicians of all stripes are worried about how independents will react to a vote — or multiple stop-gap votes — to raise the debt ceiling. Many executives on Wall Street believe Washington is playing an enormously dangerous game with what is typically a non-controversial vote.
Sen. Chuck Schumer (D-N.Y.), who leads the Senate Democrats’ messaging efforts, expressed anger that Boehner was searching for leeway on the debt limit.
“The speaker seems to be testing out how far he can venture onto a frozen lake before the ice breaks. He should listen to business leaders who are telling him to watch his step. Messing around with the debt ceiling just to satisfy the tea party will lead to higher interest rates and an economic cataclysm.”
The Wall Street executives say even pushing close to the deadline — or talking about it — could have grave consequences in the marketplace.
“They don’t seem to understand that you can’t put everything back in the box. Once that fear of default is in the markets, it doesn’t just go away. We’ll be paying the price for years in higher rates,” said one executive.
Another said that “anyone interested in ‘testing’ the debt ceiling should understand the U.S. debt traded wider [with a higher yield] than Greek debt roughly five years ago. Then go ask CBO what happens to our deficits/public debt to GDP, if the 10-year [Treasury bond] goes from 3.5 percent to 5.5 percent to 7.5 percent.” The executive said such an increase would result in a downgrade of U.S. debt by ratings agencies and an end to the dollar as the standard global reserve currency.
By: Ben White, Politico, April 13, 2011
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