Friday, July 1, 2011

Resolving the U.S. Debt Crisis

The Washington Post and others report that debt crisis talks between the President and Congressional leaders have stagnated. By insisting on tax hikes, and by refusing to negotiate with Republicans, it's clear the President thinks a government shutdown and potential default will benefit Democrats politically. He might be right.

Both Boehner and McConnell have said they're not interested in forcing a default. They're willing to pass a smaller compromise bill that includes fewer spending cuts, but also raises the debt limit by less, requiring another debt hike sometime before the 2012 elections. Democrats of course don't want this.

If Democrats hold the line and insist on tax increases, and refuse to pass a smaller debt limit increase, here's what House Republicans should do: pass a bill raising the debt limit by the exact amount needed to make federal debt payments through 2012, thus providing the means to avert default. They should pass this without any spending cuts or tax increases. This would take the default threat off the table, and force Democrats to confront the primary budget deficit.