WASHINGTON — The top Republican in Congress wants trillions of dollars in spending cuts as part of must-pass legislation allowing the federal government to continue borrowing to keep it operating and meeting obligations to investors.
House Speaker John Boehner also says that any legislation to raise the so-called debt limit beyond its current $14.3 trillion cap should be accompanied by spending cuts larger than the amount of the permitted increase in the debt.
The Ohio Republican was scheduled to make the comments in a speech Monday night to the New York Economic Club; excerpts were released after the markets closed. Boehner's comments come as investors and business groups have been seeking assurances that the GOP-controlled House will join with President Barack Obama and the Democratic-led Senate to enact the must-pass debt limit measure, which is needed to prevent a market-roiling, first-ever U.S. default on its obligations.
"It's true that allowing America to default would be irresponsible," Boehner says. "But it would be more irresponsible to raise the debt ceiling without simultaneously taking dramatic steps to reduce spending and reform the budget process."
The government is headed toward a $1.6 trillion deficit this year requiring it to borrow more than $125 billion a month. It's unclear how much of a debt limit increase is coming, but it would take a record increase in the $2 trillion range to avoid a second vote before next year's elections.
The debt measure's path through Congress promises to be extraordinarily difficult since the arrival of 87 House GOP freshmen — many elected with tea party backing last year — for whom the debt vote is politically difficult.
Boehner's remarks are notable since it's virtually impossible to produce spending cuts of that size without addressing major benefit programs like Medicare. And they came less than a week after Majority Leader Eric Cantor, R-Va., and other top Republicans seemed to acknowledge that political reality would probably rule out such cuts before the 2012 presidential and congressional elections.
"We should be talking about cuts of trillions, not just billions," Boehner said. "They should be actual cuts and program reforms, not broad deficit or debt targets that punt the tough questions to the future."
In fact, one of the options being considered by Republicans is to impose a hard cap on government spending that would be backed up with across-the-board spending cuts. The idea is firmly opposed by the White House.
Democrats admit freely that the must-pass debt limit legislation is going to have to have to be accompanied with cuts to spending, and Vice President Joe Biden on Tuesday is hosting a second meeting of a group of lawmakers on deficit reduction. The group is supposed to come up with bipartisan recommendations on deficit curbs to add to the debt limit measure.
Treasury Secretary Timothy Geithner has told lawmakers that while the government will officially reach the official debt ceiling in mid-May he can take advantage of bookkeeping maneuvers to stave off a first-ever default until Aug. 2.
Sen. Chuck Schumer, a New York Democrat with strong ties to Wall Street, told reporters Monday that it would be a mistake to wait that long to approve the legislation since the markets could easily be roiled when the legislative process takes inevitable twists and turns. Schumer says it would a mistake for Boehner to cut it too close to the Aug. 2 deadline.
"A default would be even more catastrophic than a shutdown. The consequences are much more far-reaching and disastrous for the economy," he said.
Boehner negotiated for weeks with the White House earlier this year on legislation funding agency budgets through the Sept. 30 of the budget year. But that agreement was reached on the cusp of a partial government shutdown — a luxury lawmakers probably won't have in the case of the debt-limit measure.
"If America were to default, even for 24 hours, that would have an unprecedented and a catastrophic impact on global financial markets and on American markets," said Roger Altman, a former top Treasury Department official under President Bill Clinton. "You either default or you don't. There's no saying, 'I'm sorry. I didn't mean it.' And that makes it totally different ... from a government shutdown."