Thursday, June 30, 2011

Republicans warned: Debt ceiling must be raised with tax increases.

World’s top economists send letter urging Congress to raise debt ceiling

235 world economists, including six Nobel Laureates, have sent a letter to Congress urging it to raise the federal debt limit immediately WITHOUT drastic spending cuts.  They warn that not raising the debt limit and/or doing so only in exchange for drastic cuts in federal spending could push the United States back into a recession.

The full text of the letter follows:

Dear Speaker Boehner, Minority Leader Pelosi, Majority Leader Reid, and Minority Leader McConnell,

We, the undersigned economists, urge Congress to raise the federal debt limit immediately and without attaching drastic and potentially dangerous reductions in federal spending. Not doing so promptly could have a substantial negative impact on economic growth at a time when the economy looks a bit shaky. In a worst case, it could push the United States back into recession.

The U.S. economy looks fragile at present. Economic growth has been too weak to generate sufficient new job creation. Reaching the limit on total outstanding debt could force a dramatic and sudden cut in federal spending that would destroy jobs and threaten the recovery. To remove spending from the economy at such a pivotal moment would be irresponsible.

Failure to increase the debt limit sufficiently to accommodate existing U.S. laws and obligations also could undermine trust in the full faith and credit of the United States government, with potentially grave long-term consequences. This loss of trust could translate into higher interest rates not only for the federal government, but also for U.S. businesses and consumers, causing all to pay higher prices for credit. Economic growth and jobs would suffer as a result.

Click here to see the full text of the letter and list of signatories.



This afternoon Obama told the Republicans their position that they would not accept any tax increases as part of a deal to raise the debt limit was not “sustainable.”  He noted that Democrats have been willing to compromise and “move off their maximalist position” and that Republicans needed to do the same.

Obama "If everybody else is willing to take on their sacred cows and do tough things in order to achieve the goal of real deficit reduction, then I think it would be hard for the Republicans to stand there and say that, 'The tax break for corporate jets is sufficiently important that we're not willing to come to the table and get a deal done,' or, 'We're so concerned about protecting oil and gas subsidies for oil companies that are making money hand over fist, that's the reason we're not going to come to a deal.  I don't think that's a sustainable position."

International Monetary Fund

 The International Monetary Fund warned that “the federal debt ceiling should be raised expeditiously to avoid a severe shock to the economy and world financial markets.”


Republican House Speaker John Boehner responded to “The president's remarks today ignore legislative and economic reality and demonstrate remarkable irony,” Speaker John Boehner said in a prepared statement. “The president is sorely mistaken if he believes a bill to raise the debt ceiling and raise taxes would pass the House. The votes simply aren’t there -- and they aren’t going to be there.

“A debt-limit increase can only pass the House if it includes spending cuts larger than the debt-limit increase; includes reforms to hold down spending in the future; and is free from tax hikes," Boehner stated. "The longer the president denies these realities, the more difficult he makes this process. If the president embraces a measure that meets these tests, he has my word that the House will act on it. Anything less cannot pass the House.”

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