President Obama held budget talks with key members of the House on Wednesday after lawmakers held a symbolic vote on Tuesday on raising the debt ceiling without including either spending cuts or new revenues [the vote failed]. Alice Rivlin argues that the real questions are whether anything will be attached to a future debt-ceiling bill that can pass, whether such legislation will force future spending cuts, and whether it will make significant inroads to reduce the deficit. Those outcomes were not addressed by Tuesday’s vote, she said.
The vote today, I think, has very little significance. It was intended to show that there isn’t support for raising the debt ceiling. Of course we are going to have to raise the debt ceiling. The big question – and it is a difficult question – is ‘what will be attached to a debt ceiling bill that passes?’ Will it make significant inroads into future deficits? Will it have a process attached to it that will force future reductions? Those are the real questions. That is not a part of what is happening today.
Lessons from the debt: pay down the deficit
We should do as much future deficit reduction as the Congress can agree on. That may be fairly large. It might be more than one trillion dollars over ten years, and that would be significant, but I don’t think that they’re going to get a whole plan that does what most of us think is necessary to stabilize the debt over the next few years. So they will have to take a partial plan, and then some budget process changes that will trigger action in the future. I think that is a very good idea. It is not as good as fixing the whole thing, but we don’t have time to fix the whole thing now before the debt ceiling has to be raised.
Managing the debt means compromise
The debt ceiling is a gun to the head. In an ideal world we would not have a debt ceiling, we would have sensible fiscal policy that did not get us into this fix, but we are not in that world. I think given that we really need something to force the Congress and the president to come together, to work together constructively to get us back on a sustainable track for the federal budget and the future of the debt. Given all that, having the debt ceiling force that issue is probably a good thing.
Spending cuts alone won’t cut it
Paul Ryan accomplished a couple of things. First, he put a plan on the table and that has forced other people to put plans on the table (including the president, who has put forward a different plan, but certainly a plan). The other thing that I think Paul Ryan illustrated very clearly is that a plan which depends only on spending cuts is not viable, nor is it acceptable. We have to have some revenue increases, because the spending cuts that would get us to stability in the debt are just so big that people are not ready to accept them.