Democrats and Republicans reacted swiftly on Monday to the news that Standard & Poor’s had downgraded its outlook on America’s long-term credit rating from “stable” to “negative,” with each party seizing on the warning to back up its position in the escalating debt-ceiling debate.
Republicans argued that the news illustrates the gravity of the country’s debt crisis and the need for any debt ceiling vote to be accompanied by a plan to tackle the country’s longer-term fiscal problems.
“Serious reforms are needed to ensure America’s fiscal health, and today S&P sent a wake-up call to those in Washington asking Congress to blindly increase the debt limit,” House Majority Leader Eric Cantor (R-Va.) said in a statement. “Today’s announcement makes clear that the debt limit increase proposed by the Obama administration must be accompanied by meaningful fiscal reforms that immediately reduce federal spending and stop our nation from digging itself further into debt.”
Sen. Mark Kirk (R-Ill.), a former five-term House member who won election last fall to Obama’s former Senate seat, argued that the coming debt-limit vote “offers the chance to save the dollar and our economy.”
“If we miss this chance or if congress sends the president a blank check, then the following quote from S&P is a stark warning for our future: ‘We believe there is a material risk that U.S. policymakers might not reach an agreement on how to address medium- and long-term budgetary challenges by 2013; if an agreement is not reached and meaningful implementation is not begun by then, this would in our view render the U.S. fiscal profile meaningfully weaker than that of peer ‘AAA’ sovereigns,’” Kirk said in a statement.
Meanwhile, a group of more than 100 House Democrats led by Rep. Peter Welch (D-Vt.) on Monday reiterated its call for a “clean” debt limit vote, or a vote with no conditions attached.
In a statement, Welch contended that the New York Stock Exchange’s sharp drop in reaction to the Standard & Poor’s ratings change Monday morning could be a harbinger of worse things to come if a political showdown on the debt limit raises doubts about whether the country will fulfill its financial obligations.
“America pays its bills,” Welch said. “I hope Majority Leader Cantor and those in Congress seizing upon debt ceiling pressure as a ‘leverage opportunity’ are listening to the markets today and thinking twice about their risky strategy. ... By playing brinksmanship with the debt ceiling, he is willfully risking the full faith and credit of the United States of America. The markets have doubts about America’s ability to get its fiscal house in order. And they are right. If Mr. Cantor persists in playing politics with the debt limit he will be held accountable for unleashing the financial hounds of hell.”
The group of 114 House Democrats, comprised of mostly liberal members, sent a letter Monday to House Democratic leaders urging them to convene a party caucus to establish a Democratic position in favor of a clean debt limit extension.
Even if House Democrats stake out a firm position on a clean debt limit vote, it’s not certain Obama would join them. House Speaker John Boehner (R-Ohio) told reporters last week after a meeting at the White House that Obama said he’d be open to proposals that would not include a clean vote.
The Treasury Department estimates that the country will reach its debt ceiling by mid-May, although the government could take measures to extend to early July the drop-dead date for a vote.