With House Republicans now pushing for a temporary extension of the debt limit, which would mean another fight along these lines a few months from now, it’s worth asking: Is there anyone significant or credible out there aside from them who is willing to say this is a good idea?
Former officials who worked on the debt ceiling increase with Ronald Reagan — who remains a GOP icon despite the inconvenient fact that he raised the debt ceiling and taxes nearly three dozen times — didn’t think so when they were confronted with the idea.
According to a 1985 Associated Press article passed along by a Democrat, Ronald Reagan’s treasury secretary, James Baker, said that a short term increase then being debated would constitute Congress “shirking its responsibilities.”
Independent financial analysts don’t think it’s a good idea. Several of them have concluded that a short term solution could result in a downgraded credit rating. Said Bank of America-Merrill Lynch in a note:
“A snap credit rating cut in August could occur upon a late or very disappointing stopgap deal, but it is more likely in several months when the follow-up deal disappoints. The former could have a more negative impact on stocks than the latter, as a delayed downgrade should give investors more time to digest the implications.”
Meanwhile, Mohamed El-Erian, the CEO Of PIMCO, said that the “political ground is being prepared for a short term stop gap compromise” that could push stocks down and leave the U.S.’s debt rating “‘extremely exposed to a damaging downgrade.’”
Even House Republicans previously saw a short-term increase as a bad idea, as the White House was quick to point out, because it would cause the kind of “uncertainty” that GOPers have insisted regularly hampers job creation.
“It doesn’t give you certainty,” Camp said back in June when Mitch McConnell previously floated the idea. “Ideally you’d like to get that settled and not have it continually a hanging-over issue.”
Okay, so McConnell seems to have supported the idea, but only to escape from a political jam. Anyone else? This isn’t meant as a rhetorical question or a “gotcha.” Rather, it underscores what a significant departure it is from common wisdom for Republicans to be urging this route, rather than take Harry Reid’s latest offer of spending cuts and no tax increases, which in itself would constitute a big victory for Republicans, if only they would take it.