AUGUSTA, Maine – The federal credit card is maxed out, but the Obama administration has a temporary reprieve as lawmakers work on a measure to increase the federal debt ceiling while laying out a blueprint to reduce the budget deficit.
“We have to have a long term, sustainable debt reduction plan,” said Sen. Olympia Snowe, the senior member of the state’s congressional delegation. “I see that as pivotal to our future. But regardless, we know it has to be done and it has to be done as part of a debt reduction plan. “
She said it is “regrettable” that it is taking the threat of a debt crisis to get Congress to work on a long term debt reduction plan. She expects Congress will extend the debt limit because of the severe consequences of not raising the limit to allow government to function.
“The agreement that was reached, the $38 billion in cuts to this year’s budget, is a start,” Snowe said, “It will mean a $315 billion reduction in debt over the next 10 years. But it is just a start.”
A member of the Senate Finance Committee, she said negotiators should be looking at all ways to reduce the deficit, including taxes as well as spending reductions. She said several of the tax breaks given to oil companies should be repealed with that additional revenue dedicated to lowering the deficit.
“It’s not only entitlements that we have to look at,” said 2nd District Rep. Mike Michaud. “You have to look at the tax breaks that are out there. I think it is outrageous that General Electric made billions of dollars and paid no taxes.”
He said there is no doubt Congress will increase the debt limit because of the disastrous impact on the economy if the country were to default on its obligations. He said to get to the target of significant debt reduction, it now stands at a mind numbing $14.294 trillion dollars, programs must be cut and eliminated, and tax breaks must be eliminated or reduced as well.
“We had a good start with the agreement to cut this year’s spending,” he said. “But we have a lot more work to do to do what we need to do.”
Some of the issues under discussion in the talks between congressional leaders and the Obama administration have been discussed publicly. They include increased efforts to eliminate fraud and abuse in entitlement programs such as Medicaid, increased premiums for federal pension plans, and the sale of government properties and radio spectrum for wireless services. It also includes cuts in agricultural subsidies.
“That is an area I having been trying to cut for years,” said Sen. Susan Collins. “Unfortunately, I have not been successful. I think the debt ceiling debate presents a real opportunity for Congress to approve some budgetary reforms that will put some real constraints on spending.”
She said Congress has a couple of months to work on a deal because the Treasury is using some “budgetary gimmicks” to keep government operating without the need to borrow.
“Unfortunately, I think we will go right up to whatever that deadline is before an agreement is reached,” Collins said. “Just like what happened with the threatened shutdown of government.”
She agreed that tax breaks, particularly for the very profitable oil industry should be on the table for discussion. She said new taxes have strong opposition but she believes any deal will have to include new revenues along with spending cuts to get the bipartisan votes needed to pass.
“People are going to have to bite the bullet and raise the debt ceiling basically for the economy of our country to move forward and for us to be all right in the financial markets around the world,” said 1st District Rep. Chellie Pingree.
She is supporting an effort of many members of Congress to work on a bipartisan agreement that will address the deficit through cuts and taxes. She said that when the final deadline is looming Congress will act.
The federal government has had debt ceiling votes in the past. In 1995 and in 1996, President Bill Clinton and the GOP controlled House fought over reducing the deficit. Deals were worked out in both years to avoid a default crisis.
The federal government must borrow money this year to pay its bills because the budget includes $1.5 trillion dollars in spending not paid for. The obligations range from entitlement programs to military spending and the need to pay the interest on existing debt.