Enquirer Herald

Mulvaney: Debt ceiling debate a 'fabricated crisis,' both sides at fault

U.S. Rep. Mick Mulvaney says the nation would not have suffered the economic calamity that was widely predicted to occur if Congress had been unable to reach a deal last week to raise the debt ceiling.

Mulvaney said he fears that some Republicans appointed to a special committee to reduce the nation's debt will cave to Democrats pushing for revenue increases.

The only solution, said Mulvaney, an Indian Land Republican representing the 5th District, is a bill requiring a constitutional amendment to balance the budget before raising the debt ceiling.

He helped write Cut, Cap, and Balance, a bill proposing just that. The bill passed in the U.S. House with mostly GOP support. The Senate tabled the bill.

"The only chance to pass a balanced budget amendment would be to stay in Washington" and see it through, Mulvaney said Wednesday. "Now the pressure's off."

The pressure is off because Congress passed a compromise bill to raise the debt ceiling in exchange for some spending cuts now and the promise for more later.

Mulvaney, and other South Carolina Republican lawmakers, voted against the bill whose slow emergence inspired fear of default and economic crisis.

There is disagreement on whether the threat of default was real.

Many "thought there was going to be some emergency, that there was going to be some crisis," Mulvaney said. "I didn't, but a lot of people did."

Mulvaney criticized "fear mongering" from both parties for turning the debt ceiling debate into a "fabricated crisis."

"There's plenty of blame to go around," he said.

Instead, legislators bought "short-term stability" for "long-term problems," he said.

The debate over the debt ceiling was an opportunity for legislators to do something "big," he said, and make deeper cuts.

But that didn't happen, he said.

"This is how laws get passed in Washington, D.C. - out of fear and out of hurrying to do things that aren't in our long-term best interest."

Gauging the threat

Congress pushed toward a deal to beat an Aug. 2 deadline of reaching the nation's debt ceiling. Economists warned legislators of the consequences if the nation was unable to pay its debt.

Mulvaney said the threat was a bluff. As evidence of a fake crisis, Mulvaney said, Treasury Secretary Timothy Geithner "was telling Wall Street there wasn't going to be a default."

Mulvaney balked at the idea that Social Security checks would go unpaid. There's money available to write those checks, he said.

The view is popular among members of the tea party, whose support helped propel Mulvaney - along with other conservative Republicans - to victory in 2010's midterm elections. Mulvaney ousted John Spratt, a longtime Democratic from York, in the race for the 5th District.

Rep. Jim Clyburn, South Carolina's lone Democratic congressman, criticized Mulvaney's views. Clyburn called it "tea party silliness."

Legislators shouldn't risk failing to raise the debt ceiling "just because there's money in the system," Clyburn said Friday. Doing so only creates other problems, he said, "then you have to figure out who's going to get paid."

Clyburn said lawmakers must protect the nation's creditworthiness.

Rising interest rates were another threat economic experts warned states about, he said.

"What will it do for the schools in Rock Hill when they want to build a school and go to get a bond and have to pay higher interest rates?"

While Mulvaney maintains that he never feared the threat of default, and voted "no" against the compromise bill, some political analysts said there was little risk in taking that position.

Winthrop University political science professor Scott Huffmon said legislators "all knew that they weren't going to let the country's economy be seriously threatened," he said.

"The leadership is not going to allow the legislature to make a vote in that way" because they know the consequences, he said.

The leadership gathered support before the vote and knew the bill would pass regardless of opposition, he said.

"It's part of the gamesmanship," Huffmon said. "Mick Mulvaney is not careless and reckless. He is not going to make a reckless vote. He'll make a calculated vote."

Now that a credit ratings agency has downgraded the country's credit - an outcome legislators were trying to avoid - Mulvaney is standing behind his vote.

"A downgrade is exactly what we should expect when we have so much debt and have shown so little interest in actually spending less," Mulvaney said in a statement released Saturday.

Finding a solution

As part of the debt ceiling negotiations, Congress agreed to form a 12-member joint committee tasked with proposing a plan to reduce the deficit by at least $1.5 trillion over the next decade.

The committee has until Nov. 23 to vote on a plan. The House and Senate have until Dec. 23 to take an up-or-down vote on it. The cuts will allow another $1.2 trillion increase in the debt ceiling.

If the committee or Congress cannot agree on a plan, automatic cuts will be made to various programs. The cuts won't affect Social Security, Medicaid, military and civilian pensions, and most low-income programs. Medicare reductions would only affect payments to providers.

Mulvaney said he is worried that Republican members of the committee - fearing the committee's failure - will compromise with Democrats seeking revenue increases instead of finding deeper cuts.

Huffmon agrees that the debate for the committee could change.

"There's a chance that some Republican will come over (to Democrats' side)," avoiding criticism from Democrats, who will likely ask, "You risked the entire economy to protect a tax break for the wealthy?"

Mulvaney said he would prefer the automatic cuts than any plan that calls for tax increases.

He said he is willing to support defense cuts.

But his proposals remain unlikely bets.

The balanced budget amendment never really had a chance, said Kyle Kondik, a political analyst with the University of Virginia's Center for Politics.

"It's almost impossible to amend the Constitution," and the bill didn't have wide enough support to begin with, Kondik said.

Both houses of Congress would have to pass the bill by a two-thirds vote and three-fourths of states would have to ratify it for the amendment to take effect.

"I don't think it was ever a realistic possibility," Kondik said.

Mulvaney also proposed freezing defense spending at 2011 levels. The measure received modest bipartisan support in the House, but failed, 135-290.

Last week, Mulvaney sounded encouraged by the proposal's bipartisan support. But he's also faced challenges because of his own party's unwillingness to compromise.

It was the GOP's poor appetite for defense cuts that kept any out of Cut, Cap, and Balance bill, he said.

"It was one of the weaknesses of the bill," he said. "My party is not ready to cut defense spending."

His forecast moving forward looks grim:

"A lot of people back home will think we've solved the problem," he said. "Nothing could be further from the truth."