House GOP leader warns economy will sink if debt-ceiling deal isn't reached

House Majority Leader Eric Cantor (R-Va.) on Monday warned of an urgent need to strike a deal to raise the debt ceiling, telling reporters that “we don’t want the markets to make this decision for us.”

Cantor, who is representing House Republicans in talks led by Vice President Biden, acknowledged there is a growing concern that financial markets will rattle and interest rates will spike if congressional leaders cannot reach an agreement before Aug. 2, the deadline the Treasury Department has set for lifting the nation’s $14.3 trillion debt limit.

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The majority leader reiterated, however, that spending cuts and reforms are an essential requirement to a deal that the markets, and the public, find credible. 

“We don’t want the markets to make this decision for us, because that’s exactly what we’re trying to avoid in saying we’ve got to reduce spending," Cantor said. "You’ve got to implement reform."

He said the “urgency” of the looming deadline is something “everybody assumes.”

Cantor said if Congress simply raises the debt ceiling without spending cuts, which the House has already rejected, tax hikes would be on the horizon.

“If you don’t, if you just check the box and raise the debt ceiling, the markets take care of it for you. Interest rates will skyrocket, and there will be no way for us to see any return to growth anytime soon. We’ll have to raise taxes and the rest.”

Republicans have pointed to warnings from major credit rating agencies that U.S. debt will be downgraded if the debt ceiling isn’t raised and if a long-term deficit reduction plan isn’t put in place. 

The Biden group will meet three times this week as lawmakers try to arrive at a framework for an agreement for raising the debt limit before July 4. Cantor acknowledged the Aug. 2 deadline but refused to set a firm deadline for striking a deal within the Biden group.

“It is about getting right,” he said. “It’s about making sure you get the necessary amount of spending cuts and reforms.” 

In a rarity for a GOP leader, Cantor praised Biden’s leadership of his ad hoc committee. 

“We have had some really significant and substantive discussions in these talks, and I think the success of these talks thus far is due to the vice president and the way he has conducted these meetings,” Cantor said.

“I’m very impressed with the way he’s conducted these meetings,” he added. Biden, he said, “does like to talk a lot. But I guess all of us do, or we wouldn’t be here.”

He said the famously long-winded vice president has “conducted these meetings in a way that’s kept the ball rolling.”


Cantor also said he wants to hold just one vote to raise the debt limit, rather than hold multiple votes for short-term increases. Because Republicans are demanding spending cuts that exceed additional borrowing authority, a single vote extending the debt ceiling through the 2012 elections would mean spending cuts in excess of $2.4 trillion. 

“It’s my desire to have one debt ceiling vote,” Cantor said, though he noted that decision would ultimately rest with Speaker John Boehner (R-Ohio). 

“I think we can accomplish trillions of dollars in spending reductions and then put the necessary reforms in place where you actually are going to achieve a lot more than that.” 

The majority leader said the Biden group is primarily focused on achieving cuts within the traditional 10-year window for federal budgeting, but he allowed that cuts could be pushed even further into the future with the inclusion of fiscal process reforms, such as a cap on spending.

Updated at 4:05 p.m.