GOP courts Wall Street amid debt limit concerns
Updated 4:27 p.m. Eastern Time
House Speaker John Boehner is traveling to New York today to lay out the parameters of the debt ceiling debate to a group of Wall Street heavy-hitters amid concerns from the financial industry that Republicans' reluctance to lift the ceiling could negatively impact the markets.
A Boehner aide confirms that the speaker will voice support for including reforms to Medicare as part of negotiations over raising the debt ceiling. Boehner plans to call for "an honest conversation" on reducing the deficit as well as immediate spending cuts. Republicans have said they are willing to vote to raise the debt ceiling, which is now $14.3 trillion, but only in exchange for concessions on spending.
UPDATE: Boehner has now released excerpts from the speech, among them a call for spending cuts to exceed the increase in the debt limit.
"We should be talking about cuts of trillions, not just billions," he plans to say. "They should be actual cuts and program reforms, not broad deficit or debt targets that punt the tough questions to the future." Full excerpts below.
Democrats, meanwhile, have suggested that not raising the debt ceiling would be a "catastrophic folly." Not increasing the debt ceiling could mean increased interest rates, the shutdown of much of the government, and delays in Social Security and Medicare checks tied to the government's inability to make payments to agencies. Even simply approaching the August 2 deadline set by Treasury Secretary Timothy Geithner without increasing the ceiling could significantly rattle markets.
Boehner is in somewhat of a tough spot on the issue. On one side are the prominent Wall Street players, many of them significant Republican donors, who want to see the debt limit raised as soon as possible. (It's worth noting that Boehner, joined by New York mayor Michael Bloomberg, reportedly plans to host a fundraiser Monday night.) On the other side are a large group of fiscally-conservative House Republicans, many of them freshmen, who are vowing to vote against raising the ceiling without significant spending cuts and other concessions.
GOP Rep. Michele Bachmann, founder of the House Tea Party caucus and a potential presidential candidate, said in a statement Monday that "[a]ny vote on the debt ceiling must include a vote to fully defund ObamaCare. To do less is to insure that next debt ceiling vote - the 75th increase in the last half-century - will not be the last, and that is unacceptable."
The conservative Republican Spending Committee, which includes more than 3/4 of House Republicans, is expected to release its conditions for raising the debt ceiling this week. It is expected to call for a spending cap at 18 percent of GDP, immediate spending cuts and a balanced-budget amendment.
On a conference call Monday morning, New York Sen. Charles Schumer was quick to spotlight Boehner's dilemma.
"Politically speaking, Speaker Boehner has a tough line to walk with his party," the Democrat said. "Some members of his caucus seem unafraid of a default, just as they welcomed a shut-down. Speaker Boehner must be willing to buck those folks in his party, if necessary and rise to the occasion."
"Tonight's speech by the speaker will be a litmus test of whether House Republicans plan to finally approach the debt ceiling as adults," he added. "So far, many of them have not been responsible about this issue at all."
Schumer also said that "[c]redits markets will not wait for reassurance until August 2nd."
"If investors begin to believe that there is the slightest chance of a U.S. default, they'll start reacting negatively and interest rates could well rise -- could rise well before the ceiling is actually hit," he said.
Boehner is not the only high-profile Republican courting Wall Street this week. House Majority Leader Eric Cantor also plans to travel to New York to meet privately with financial executives, among them the CEO of the New York Stock Exchange, and to ring the NYSE opening bell.
On Tuesday, Vice President Biden is hosting a meeting with congressional leaders in what marks the second-round of talks between the Obama administration and leaders in Congress to come up with an agreement on the debt limit issue. The administration claimed "progress" following last week's first-round, two-hour meeting, though there has been no announcement of any sort of agreement.
Republicans have signaled that they may be backing off their support for the proposal in Paul Ryan's GOP budget plan to transform Medicare into something like a voucher program, which is seen as potentially politically damaging. (But despite the signals, they insist they still stand behind the plan.) At his briefing Monday, White House Press Secretary Jay Carney was asked if it would be "helpful" if Medicare reform were off the table in the negotiations.
"What remains on and off the table is something for them to decide," said Carney. "What we want to see is...as much successful deficit reduction as we can, where we can find common ground, in a way that protects our seniors, maintains the investments that are vital to continue to have the economic growth that we've seen coming out of this recession and continue the job growth that we've seen as recently as Friday, with the decent private sector job growth report. So those are the parameters that we're bringing to the table."
Carney added that President Obama recognizes that "one of the major drivers of our long-term deficit and debt problems is entitlement spending."
Democrats are also facing pressure not to touch Medicare. Liberal group MoveOn.org emailed supporters Monday complaining that some Democrats have all endorsed the spending caps being pushed by Republicans. Such caps, the group said, would "actually trigger massive cuts to Medicare within a few years" -- and amount to a "Medicare kill switch." MoveOn asked supporters to contact their senators to oppose the effort.
On a conference call Monday morning, Schumer signaled support for deficit caps, not spending caps. He said setting a cap on the deficit would allow the government "to confront our debt in the only way possible, through both spending cuts and increased revenues."
EXCERPTS FROM BOEHNER'S SPEECH:
"[W]e will not succeed in balancing the federal budget and overcoming the challenges of our debt until we commit ourselves to government policies that will let our economy achieve long-term growth. Our economy won't grow as long as we continue to trip it up with short-term gimmicks from Washington. ... 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."
"It's true that allowing America to default would be irresponsible. But it would be more irresponsible to raise the debt ceiling without simultaneously taking dramatic steps to reduce spending and reform the budget process. To increase the debt limit without simultaneously addressing the drivers of our debt -- in defiance of the will of our people -- would be monumentally arrogant and massively irresponsible. It would send a signal to investors and entrepreneurs everywhere that America still is not serious about dealing with our spending addiction. It would erode confidence in our economy and reduce certainty for small businesses. And this would destroy even more American jobs."
"Without significant spending cuts and reforms to reduce our debt, there will be no debt limit increase. And the cuts should be greater than the accompanying increase in debt authority the president is given. We should be talking about cuts of trillions, not just billions. They should be actual cuts and program reforms, not broad deficit or debt targets that punt the tough questions to the future. And with the exception of tax hikes -- which will destroy jobs -- everything is on the table. That includes honest conversations about how best to preserve Medicare, because we all know, with millions of Baby Boomers beginning to retire, the status quo is unsustainable. If we don't act boldly now, the markets will act for us very soon. That's the warning we got from Standard & Poor's a few weeks ago."
"A tax hike would wreak havoc not only on our economy's ability to create private-sector jobs, but also on our ability to tackle the national debt. Balancing the budget requires spending cuts and economic growth. We won't have economic growth if we raise taxes and fail to address the drivers of our debt. The mere threat of tax hikes causes uncertainty for job creators -- uncertainty that results in less risk-taking and fewer jobs. If we're serious about balancing the budget and getting our economy back to creating jobs, tax hikes should be off the table."
"There's a clear connection between high gas prices and the weak dollar that some in Washington have quietly welcomed over the past couple of years. It's well known that when you print tons of money, the dollar sinks, and the price of food and energy rises -- significantly. Yet the American people are told there is nothing that can be done about it. This is simply untrue. Washington has also kept most of our nation's vast energy resources under lock and key for decades, over the clear objections of the American people -- the people who own those resources. If we had listened to the people decades ago -- or even a few years ago -- many of these resources would be available to us right now to lower the price of energy. And we would probably have about a million private-sector jobs in America that we don't currently have."