House Speaker John Boehner (R-OH) will address the Economic Club of New York over dinner next Monday. His remarks come at a crucial time as world money managers assess whether the U.S. will get its fiscal house in order. Here’s what I expect to hear.
- Default is not an option. There won’t be any voting down of a clean debt limit just to prove an increase can’t pass without spending cuts and budget process reforms.
- Media portrayals of House Republican Freshmen as Tea Party crazies willing to risk economic disaster are inaccurate caricatures. House Republicans are determined to change the path of runaway government spending and to focus on effective growth oriented policies.
- President Obama and Democrats have to get serious about cutting spending.
- Tax increases are not an option, although tax reform that lowers rates on a revenue neutral basis is.
- If Medicare vouchers aren’t acceptable, then some other means of ratcheting down federal health care spending must be found. If not, Medicare will run out of money by the end of the decade with worse consequences.
- Even a $4 trillion deficit reduction plan may not be enough to restore budget balance within 10 years, so there has to be process that produces repeated spending cuts until balance is achieved.
- Enacting a $4 trillion deficit reduction plan by August 2, the latest deadline for a debt limit increase offered by Treasury Secretary Tim Geithner, is not feasible. It would be feasible to agree upon a set of annual deficit targets and broad outlines of how to get there. That could be enacted in time with a debt limit increase through the end of this year. The $4 trillion plan in detail would be enacted by the end of this year on a debt limit increase that would last until early 2013. After the election, another deficit reduction effort would be mounted to insure we hit the targets.
- We can do this.
If that’s what Mr. Boehner says, I expect world money managers to come away encouraged, but wary until they see results.