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Higgins Cites Hypocrisy in House Republican Protests

7/19/2011- "I’d like to respond to House Republicans who are protesting at the White House today regarding the debt ceiling.

In April, House Republicans voted for a budget resolution which, even though it ends Medicare as we know it, still increases the national debt from $14.3 trillion to $23.1 trillion, or 62%, over the next decade.  How can they oppose raising the debt ceiling when the plan they proposed just 3 months ago would require the debt ceiling to be raised $8.8 trillion?  

I support the only responsible action: raising the debt ceiling, along with a bipartisan compromise to reduce the debt by at least $4 trillion over the next decade.  A balanced approach would include $1 in increased revenue for every $3 in reduced spending by making common sense changes to our tax code. The President and Congress should come together to close loopholes for oil companies, corporations that shelter revenue offshore, and hedge fund managers.  Further, allowing the Bush tax breaks on the wealthiest 2% of Americans would produce $100 billion a year, or $1 trillion over the next 10 years.  

On spending, we can work together to bend the cost curve in Medicare. We could take a significant step toward doing so by using the strength of 47 million Medicare beneficiaries to negotiate volume discounts with drug manufacturers.  The Veterans Administration, with 27 million beneficiaries, negotiates volume discounts at a savings of approximately 25%.  If that same discount were to apply to the Medicare program it would produce savings of approximately $15.5 billion a year, reducing Medicare spending by 3% immediately.  This would produce real savings and address the underlying problem of Medicare: that its growth exceeds the rate of inflation, making it difficult to keep pace.  If you can bend the cost curve and keep it consistent with inflation it becomes more manageable over time.  And that helps get the federal budget under control without resorting to ending Medicare.

I also believe that while the deficit and debt are of great concern, so too is unemployment. Virtually all economists believe that infrastructure investment creates jobs immediately and creates conditions for sustained and continued economic benefit.  A balanced approach requires fiscal discipline, but also makes room for investments we need to make in areas like infrastructure as well as energy, education and research and development; investments we will need to make to create jobs and keep America competitive in the global economy.  

The game that House Republicans are playing is dangerous.  As Treasury securities are a baseline from which all other interest rates are established, default would increase the cost of borrowing for autos, home mortgages, student loans and small businesses.  Wall Street will get its money. It’s the working families throughout the nation and in places like Western New York that will get stiffed with permanently higher interest rates.  Defaulting on our debt for the first time in our history would cause a severe contraction of the U.S. economy which will increase unemployment and, ironically, the federal budget deficit.  

If Congress wants to rein in spending, the way to do that is through the annual appropriations bills.  There the worst case scenario of a stalemate is a temporary government shutdown.  Here the worst case scenario is permanent damage to the American economy and our nation’s middle class.  

There are areas in which we can address long term budget challenges in a sensible and reasonable way.  And we need to make these reforms.  But the debt ceiling allows the U.S. to pay the bills for money that has already been spent, and defaulting would result in permanently higher interest rates and more economic volatility.  This is not a meaningless exercise – this is dangerous."