Now, we know President Obama is against spending cuts. In his debt-ceiling speech this week, all he did was demonize the Republican Party, saying the GOP is making America a deadbeat nation. Obama continues to blame Republicans for throwing old folks, young people, military troops, and others under the bus. Sheer demagoguery. Awful, divisive, non-compromising, non-leadership rhetoric.
But the GOP can make hay on this with a strong spending-cut, shrink-the-government message. With no gimmicks, please.
It’s okay to extend the debt-ceiling increase for another three months (as announced by Paul Ryan and the Republican leadership in Williamsburg, Va., this week). It’s also okay to use a continuing resolution to force short-term spending cuts, and maybe even get some long-term spending-cut plans going. Perhaps even the Democrats, who haven’t passed a budget in 1,360 days, will finally put one out in response to these Republican House measures.
But allowing the borrowing limit to expire, and using some kind of prioritization of payments while the government runs out of money, will not only damage the current economy, it will absolutely sink the Republican Party for the 2014 midterm elections.
The Bipartisan Policy Center projects that on March 1, the U.S. government will receive $20 billion in revenues to cover $84 billion in committed spending to obligations like Social Security, Medicare, Medicaid, veterans’ benefits, military pay, and so forth and so on. Sure, we can cover the interest on the debt, which is only about $20 billion a month. But what about these other commitments? And how would such a dysfunctional approach look to world financial markets and credit-rating agencies?
That’s why gimmicks like this should not be used. They will snatch political defeat from the jaws of a potential spending-cut victory.
But the moral of this story is that congressional Republicans must develop an effective spending-cut message. And that message should be linked to economic growth and job creation. If they do that, they will help the economy and their political futures. If they don’t, they’re going to lose the House and undermine the economy.
I think it’s that simple.
Larry Kudlow is the host of CNBC’s “The Kudlow Report.”