Boehner's hard line on debt ceiling gets cool reception from Wall St.

NEW YORK — House Speaker John Boehner (R-Ohio) on Monday laid down an aggressive new marker in the debt-limit fight, calling for spending cuts that exceed any additional borrowing authority that Congress approves.

His tough talk drew a cool reception from an audience of Wall Street executives.

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In an economic address to financial powerbrokers in New York, the Speaker took a hard line in the negotiations to raise the nation’s $14.3 trillion debt limit and avoid a first-ever default by the federal government.

“It’s true that allowing America to default would be irresponsible,” Boehner told the Economic Club of New York on Monday evening. “But it would be more irresponsible to raise the debt ceiling without simultaneously taking dramatic steps to reduce spending and reform the budget process.

“To increase the debt limit without simultaneously addressing the drivers of our debt — in defiance of the will of our people — would be monumentally arrogant and massively irresponsible,” he said.

Boehner reiterated his demand that any increase in the debt limit be accompanied by “significant cuts and reforms.”

“And the cuts should be greater than the accompanying increase in debt authority the president is given,” he said in the 22-minute speech. “We should be talking about cuts of trillions, not just billions. They should be actual cuts and program reforms, not broad deficit or debt targets that punt the tough questions to the future.”

The Speaker’s stand drew little reaction from the banquet hall of Wall Street executives, who offered polite applause at the end of Boehner’s speech but sat in silence through his demands on the debt limit.

Boehner’s remarks are sure to heighten the brinksmanship surrounding the debt-limit fight, and they serve as a rejection of a call earlier Monday by Sen. Charles Schumer (D-N.Y.) for Boehner to explicitly rule out a default.

The U.S. is expected to hit the debt limit on May 16, but Treasury Secretary Tim Geithner has said the government could stave off a default until early August. The Treasury wants the authority to borrow an additional $2 trillion, which the department believes would last through the 2012 elections.

Boehner’s proposal would thus mean spending cuts of more than that amount, making the $38 billion that lawmakers agreed to chop earlier this year resemble a rounding error.

Vice President Biden will hold the second in a series of high-level meetings on the issue Tuesday, and President Obama is scheduled to meet with senators from both parties this week.

Boehner also pushed to have “honest conversations” about Medicare, days after GOP leaders signaled they were backing away from the party’s proposal to overhaul the entitlement program in its budget blueprint.

He did not demand that Medicare reforms be attached to the debt-limit increase, but he argued that inaction on entitlements would lead to worse outcomes than the GOP proposals would bring.

“If we do nothing, seniors’ benefits will in fact be cut,” Boehner said.

The Speaker once again demanded that tax increases be excluded from any discussion on the debt ceiling.

He assailed the bipartisan agreement reached by congressional leaders in 1990 that included tax hikes as a means of balancing the budget. The deal, he said, resulted in the recession of the early part of that decade.

“Today some seem intent on recycling the 1990 budget deal, only this time with much larger tax increases,” he said. “This is not going to happen, and I’ve told that to the president. A tax hike would wreak havoc not only on our economy and its ability to create private-sector jobs, but also on our ability to tackle the national debt.”

Boehner faced a series of pointed questions from Economic Club members after his speech, including several from Peter G. Peterson, the businessman and former Commerce secretary who now heads a foundation dedicated to deficit reduction.

Peterson’s question about the shifting of healthcare costs to seniors under the GOP Medicare program prompted a rare moment of levity in an otherwise sober evening.

“Now, I’ve got to tell you, Pete, I love you to death, but I don’t think the taxpayers ought to be paying your Medicare premium,” Boehner said. “Let me tell you: We’re broke. And for those who have substantial means, you can pay your own premium.”

After the audience laughed, Boehner quipped: “You want English, you’ll get English.”

Peterson replied: “Mr. Speaker, I’m beginning to take this personally.”

Boehner was later asked directly: “Why are taxes off the table?”

He responded: “Because I believe that raising taxes will hurt our economy, hurt our ability to have real economic growth and hurt employment in our country. We do not have a revenue problem. We have a spending problem. Let’s address the spending problem.”
 
Recalling that he came from a family of “Kennedy Democrats,” Boehner quoted President Kennedy’s call to cut taxes to the Economic Club a half-century ago. He noted, however, that Republicans were not aiming to reduce tax rates but merely to stave off increases pushed by Democrats.

He predicted that both chambers of Congress would address corporate tax reform in the next two years, and he said it could be “closely associated,” if not directly linked, to a comprehensive overhaul of the tax system that includes changes to individual rates.

Notably, the Speaker put no timetable on congressional action, saying in response to a question that unlike the battle to avert a government shutdown, “there really is no hard date when it comes to increasing the debt limit.” If Democrats were ready to accept serious spending cuts, he said, “I’d just as soon cut the deal tomorrow.”

Boehner’s speech amounted to a harsh, if familiar, condemnation of Washington politics laced with praise of the anti-government movement embodied by the Tea Party.

“Washington’s arrogance has triggered a political rebellion in our country,” Boehner said. “I don’t think ‘rebellion’ is too strong a word. The revolt we have seen by ordinary citizens over the past few years is like nothing we’ve seen in our lifetime. And it’s happening in part because the arrogant habits of Washington are having real economic consequences.”

Yet Boehner noted the fears on Wall Street about the impact a prolonged political fight over the debt limit could have on the markets.

“I know there are many in this room who are uneasy with this debate,” he said. “I understand your concerns.”

Attendees offered a mixed reaction to his presentation, with some saying he did little to allay concerns in the financial community about the debt threshold.

“Disconnected from reality,” one attendee said as he walked briskly out of the ballroom.

“It was predictable,” said Perry Braun, chief investment officer of Wilton Re., a life reinsurance company. “Not that he wasn’t genuine, but I think it was posturing.”

Nonetheless, Braun said investors are confident Congress will authorize an increase in the debt limit. “They believe that the debt limit will be raised,” he said. “The speech tonight didn’t change that.”

Al Marquis Jr., a partner at Construction Risk Partners, said Boehner was “largely on point.”

“I think he did allay those concerns, but with a relatively rigid answer,” Marquis said. As to Boehner’s hard line on not raising taxes, however, Marquis said: “I think that’s a bit of posturing.”

The president and chief executive of New York-Presbyterian, Dr. Herbert Pardes, described Boehner as “a responsible leader.”

“His demeanor is one of collaboration,” Pardes said. “I think he’ll be amenable to some kind of deal that would get us through this challenge.”

As for the Speaker’s demands, he said, “At the end of the day, people have to take strong positions.”


Updated at 10:15 p.m.