In a few short months, Congress will have to vote to raise the federal debt ceiling limit. This is a critical measure that must pass so the U.S. can borrow money to pay interest on what it already owes investors or to fund new spending. Treasury Secretary Timothy Geithner said in a letter to Congress Thursday that even a short-term default could be “catastrophic.” It would drive up interest rates and cause stock market and housing prices to plummet making future government borrowing more expensive.
“Failure to increase the limit would be deeply irresponsible,” Mr. Geithner wrote, and added: “It is important to emphasize that changing the debt limit does not alter or increase the obligations we have as a nation; it simply permits the Treasury to fund those obligations Congress has already established” — under presidents and Congresses of both parties.Although this vote should be a no-brainer, some Republicans in the House of Representatives and the Senate, say they will not vote for this increase unless spending cuts are offered. To be specific, they want cuts in Social Security. Sen. Lindsey Graham (R-SC) made his intentions clear on NBC’s Meet the Press:
This is an opportunity to make sure the government is changing its spending ways. I will not vote for the debt ceiling increase until I see a plan in place that will deal with our long-term debt obligations starting with Social Security, a real bipartisan effort to make sure that Social Security stays solvent, adjusting the age, looking at means-tests for benefits.Although some will frame their proposed changes to Social Security as necessary “reform” to make Social Security solvent, one has to question why they are pushing for these changes now, when Social Security is $2.6 trillion in surplus. What’s even more concerning is the increasing bipartisan support so cut Social Security. Even Chairman of the Senate Budget Committee, Sen. Kent Conrad (D-ND), has signaled he would like to see deficit reduction and Social Security changes like the cuts offered in the National Commission on Fiscal Responsibility and Reform co-chair proposal. These cuts include raising the retirement age, reducing COLA and means testing benefits for middle income Americans. Although these are harmful proposals that would undermine Social Security, Conrad recently wrote an OpEd for Politico, praising these “reforms:”
Savings in Social Security were used only for extending the program’s solvency — not for deficit reduction. And critical provisions were added to strengthen the safety net and protect the most vulnerable seniors and the disabled. The commission’s work demonstrates that it is possible to both bolster the Social Security safety net and restore the program’s trust funds to sustainable solvency over the long run, says Conrad.This bipartisan effort to reduce the deficit with all spending on the table, including Social Security and Medicare, has also been picked up by a group of Senators who meet behind closed doors. Sen. Saxby Chambliss (R-GA) and Sen. Mark Warner (D-VA) have spearheaded this effort, reiterating no program is safe from cuts:
Both Chambliss and Warner say nothing is off-limits as they consider ways to fix the federal budget — including possible increases in the Social Security retirement age, cuts in Medicare benefits and a complete overhaul of the federal tax code.