House says "No" to clean debt ceiling increase

June 1, 2011

Last night, the House rejected a measure to increase the debt ceiling with no accompanying spending cuts. The increase was overwhelmingly and expectedly defeated 318-97. The legislation would have allowed the federal government to borrow an additional $2.4 trillion.

This morning, the Speaker of the House John Boehner issued a statement signed by 150 economists urging Congress to pair an increase of the debt ceiling with significant spending cuts. The statement read:

An increase in the national debt limit that is not accompanied by significant spending cuts and budget reforms to address our government’s spending addiction will harm private-sector job creation in America. It is critical that any debt limit legislation enacted by Congress include spending cuts and reforms that are greater than the accompanying increase in debt authority being granted to the president. We will not succeed in balancing the federal budget and overcoming the challenges of our debt until we succeed in committing ourselves to government policies that allow our economy to grow. An increase in the national debt limit that is not accompanied by significant spending cuts and budget reforms would harm private-sector job growth and represent a tremendous setback in the effort to deal with our national debt.

There was some concern that the last night’s failed vote could send ripples through financial markets. To stem these fears, the House held the vote after markets closed. But while Wall Street has “shrugged off” last night’s vote, there is widening skepticism that Congress will reach a compromise by the August 2nd deadline. The Hill reports:

Wall Street so far has shrugged off Washington’s fight over raising the debt ceiling, but experts warn patience will wane and nerves will fray after the Fourth of July holiday.

The top bond executive for BlackRock, the world’s largest asset-management firm, said there was once 100 percent certainty that a debt-ceiling compromise could be reached by Aug. 2. Now, he said, the odds are judged to be 80 percent.

Regardless of the affect of raising or not raising, lawmakers should step back and examine the disease not the symptoms of our economic crisis. Years of overspending have driven the U.S. to the financial brink. If Washington reins in spending to sustainable levels, then we won’t have to address the debt limit ever again. For more facts on the debt ceiling debate, don’t miss our latest video: Beyond the Headlines: Understanding the Debt Ceiling.

 

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