GOP seizes S&P warning to make debt limit case
Republican in Congress today are saying the Standard & Poor's warning that it could eventually lower its rating on U.S. debt proves that President Obama should take up their recommendations for deficit reduction.
The credit rating agency today reaffirmed the U.S. government's AAA credit rating but said that concerns over "very large budget deficits and rising government indebtedness" led the agency to lower its outlook on the long-term rating to "negative." If the S&P chose to downgrade the U.S. rating in the future, the government would have to pay more to borrow money by issuing debt in public markets.
House Majority Leader Eric Cantor seized the news to push for concessions from President Obama in exchange for GOP votes to raise the debt ceiling. The S&P warning, he said in a statement, "sent a wake-up call to those in Washington asking Congress to blindly increase the debt limit."
The U.S. Treasury is on the verge of hitting the debt limit set by Congress, which currently stands at $14.3 trillion. If Congress fails to raise that limit before the Treasury reaches it, the U.S. government would essentially default on its loans.
Cantor said today that House Republicans will only vote to increase the debt limit if the vote is accompanied by "serious reforms that immediately reduce federal spending and end the culture of debt in Washington."
"As S&P made clear, getting spending and our deficit under control can no longer be put off for another day," he said.
In response to Cantor's statement, White House Press Secretary Jay Carney said today, "The debt ceiling has to be raised, and it cannot be held hostage."
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Carney reiterated that President Obama is willing to negotiate with Republicans over deficit reduction and spending reduction plans. Yet he added, "Regardless of how that process proceeds... it is absolutely a fact that Congress will raise the debt ceiling because not to do that would be a catastrophic folly."
In an interview on CBS' "Face the Nation" on Sunday, House Budget Committee Chairman Paul Ryan said Republicans did not want to "play around with the country's credit rating" - but he did not guarantee that they would vote to increase the debt limit without "cuts in controls and spending going forward."
Ryan issued his own statement today in response to the S&P warning that endorses Republican plans for deficit control, though he did not endorse conditions on the debt limit vote, or any other specific plans.
"The failure to advance solutions threatens not only the livelihoods of future generations, but also the economic security of American families today," Ryan said. "A campaign speech is no substitute for a serious, credible budget. The President and his party's leaders must put an end to empty promises and work with us to avert this looming economic crisis."
Ryan pointed to the proposed 2012 budget he released last week as a plan that "lifts our crushing burden of debt and puts our economy on the path to prosperity."
His plan calls for significant changes in tax code, including lowering the top income tax rate, as well as dramatically transforming Medicare and Medicaid. Ryan says it would lower the deficit by about $4 trillion over 10 years. Mr. Obama in a speech last week released an outline for alternative reforms that reach a similar goal -- $4 trillion in cuts over 12 years.
Carney said today that the White House expects leaders in Washington to outperform the S&P's expectations when it comes to finding a deficit reduction solution.
"The president is committed... to moving forward in a bipartisan way," he said. "He believes the fact that he and Republicans agree on a target -- $4 trillion over 10 to 12 years -- is an enormously positive development."
He pointed out that the U.S. government's bond rating remains the same for now and that the S&P analysis also said the American economy is strong, growing and diversified.
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