Holtz-Eakin: Congress Has To Raise The Debt Limit, Sooner Rather Than Later

Congressional Quarterly/Newscom

The former director of the Congressional Budget Office, and chief economic policy adviser to John McCain during the 2008 presidential campaign, says Congress has to raise the debt limit, and soon.

“I think that ultimately Congress has to raise the debt limit,” Doug Holtz-Eakin told me after moderating an event on Capitol Hill. “We have to be good stewards of the nation’s credit rating [and] doing it sooner is better than later.”

In an escalation of legislative brinksmanship over raising the debt limit, House Speaker John Boehner (R-OH) told Politico Monday that he might not hold a vote on it at all, if he can’t get buy-in from Democrats on serious spending cuts.“If the president doesn’t get serious about the need to address our fiscal nightmare, yeah, there’s a chance it [the debt limit vote] could not happen,” he said. “But that’s not my goal.” Boehner reiterated this sentiment Tuesday on Twitter. Holtz-Eakin brushed this off as a bargaining strategy, but cautioned members not to let themselves get carried away.

“I think that from the point of view of the Congress there will always be a statement of positions and desired outcomes, and it’s part of the negotiations to make clear what that is,” Holtz-Eakin said.

And it’s very clear that conservatives are not going to pass a straight-up increase in the debt limit — the President’s request is dead on arrival. So now the question is where does the deal get struck.

From the point of view of markets, markets care about two things: Number one, not being surprised — and I think both sides are trying to be very clear in what they want to have happen so that markets aren’t surprised. And number two, that you ultimately pay the bills. And number two that you ultimately pay the bills — and that means you’re going to have to move in time to avoid across the board cuts. I remain confident that will happen.

Holtz-Eakin suggested a possible way forward: Democrats and Republicans, he said, should tie the debt-ceiling vote to budget process reforms that will make it harder for Congress to punt on fiscal reforms, and then turn around and pass broad spending cuts and some revenue increases to make good on the spirit of the deal.

They will attach some sort of reform — the President’s made that clear,” Holtz-Eakin said. He endorsed tax reform — broadening the base by closing loopholes and eliminating benefits, while lowering individual and corporate rates — as “the route to higher revenue.”

But, he cautioned, “That’s not going to happen in the time frame for the debt limit. I view the kinds of things you’ll put on the debt limit as process, targets, whatever you might call that. And then substantively, past that, there are going to policy reforms, and I think tax reform has to be on the table.”