In a speech before the Economics Club of New York Monday night, House Speaker John Boehner paid homage to former President George H.W. Bush's infamous "read my lips, no new taxes pledge" and took a very hard line on the debt ceiling debate.
"Without significant spending cuts and reforms to reduce our debt, there will be no debt limit increase," Boehner said in his prepared remarks. "To increase the debt limit without simultaneously addressing the drivers of our debt…would be monumentally arrogant and massively irresponsible."
To Speaker Boehner, the "drivers of our debt" are limited exclusively to government spending, which he said needs to be cut by "trillions" not billions.
"Everything is on the table" when it comes to budget reform, including defense spending and entitlement programs, Boehner said. But tax hikes are "off the table," he pledged, because they would "wreak havoc on the economy" and further cripple job creation.
"It's extremely difficult for any outsider to judge the seriousness of these comments [which are] almost unbelievable to me," says Martin Wolf, chief economics commentator at The Financial Times. "Ruling out the reversal of tax cuts that occurred in previous administration seems to be completely inconsistent with the aim of tackling the underlying causes of the deficit."
Indeed, Boehner, who reiterated his remarks on NBC's The Today Show Tuesday morning, seems to be suffering from a bit of short-term memory loss: In addition to voting for the Bush tax cuts, the prescription drug benefit reform and funding for the wars in Iraq in Afghanistan — three major contributors to the deficit — Boehner's "lame duck" deal with President Obama to extend the Bush tax cuts and cut payroll taxes only further exacerbated America's fiscal woes.
"If they're going to persist in keeping all tax hikes off the table, obviously they're going to demand extreme cuts in entitlement programs and the defense budget," Wolf says. "It seems completely incomprehensible as a politically winning strategy."
Of course, most observers believe this is just a political strategy — and Boehner's opening gambit in negotiations with the White House over the debt ceiling. The Speaker himself said it would be "irresponsible" to not raise the debt ceiling, and most observers — Wolf included — believe there will be some compromise before the new Aug. 2 deadline. (See: Debt Ceiling Deadline Pushed Back: Will the GOP Budge?)
But Boehner talked about a "rebellion" in America against the "arrogance of Washington D.C." and there is a chance, however small, the Republicans will push the debt ceiling debate to the limit, and possibly beyond.
Should Congress fail to raise the debt ceiling, the government would soon face the difficult choice of slashing federal spending or default on its debt payments.
Either scenario, but particularly a debt default, has potentially devastating consequences for the global economy, Wolf says. "If these assumptions about the realism of American political life are wrong, then we're in completely uncharted territory."