McConnell: We Shouldn’t Talk About Default Consequences

Sen. Mitch McConnell, R-Ky., walks through the halls of the U.S. Capitol November 15, 2010. Chip Somodevilla/Getty Images

Senate Minority Leader Mitch McConnell said Wednesday he wasn’t interested in discussing the negative economic consequences that Federal Reserve Chairman Ben Bernanke said are inevitable if Congress does not agree to raise the federal debt ceiling by Aug. 2.

When asked by a reporter what assumptions McConnell has made about what might happen if a deal to raise the debt limit isn’t reached in time, or if he thinks the White House has been exaggerating the consequences of a default, McConnell said he preferred not to think about the debate from that perspective.

“I don’t think we ought to even be discussing that,” McConnell said. “I think the issue is, whether we can take advantage of this opportunity provided by the president’s request of us. He has come to us and said we need to raise the debt ceiling. Because it’s actually the only opportunity I can think of that would focus both sides on the possibility of doing something really significant about deficit and debt.”

The comments come as a bipartisan group of lawmakers led by Vice President Joe Biden are entering a critical negotiating period on making a deal on raising the debt limit and reducing the deficit. The group has an unofficial goal of reaching an agreement before the July 4 recess.

Biden group negotiator Rep. Chris Van Hollen, D-Md., told the radio program Marketplace on Wednesday that Republicans were risking serious consequences with their strategy.

“Playing a game of chicken with defaulting on the debt is a very dangerous game,” Van Hollen said. “If I’m forced to choose between a deficit reduction plan that hurt the fragile economy and was unbalanced compared to raising the debt ceiling, I would raise the debt ceiling. We need to make sure we do not default.”

McConnell has for weeks been repeating his mantra that the debt limit increase vote is an opportunity to address the nation’s $14.3 trillion debt and $1.6 trillion deficit.

White House spokesman Jay Carney said last month that Republicans are holding the debt ceiling hostage to big spending cuts. Bernanke and Treasury Secretary Tim Geithner have both warned of serious consequences if the debt ceiling isn’t raised.

Bernanke warned last week that if Congress can’t agree to pay for the spending it has already approved, it could cause interest rates to rise and slow any economic recovery.

“Even a short suspension of payments on principal or interest on the Treasury’s debt obligations could cause severe disruptions in financial markets and the payments system, induce ratings downgrades of U.S. government debt, create fundamental doubts about the creditworthiness of the United States, and damage the special role of the dollar and Treasury securities in global markets in the longer term,” he said during a speech at the Committee for a Responsible Federal Budget.

McConnell has stuck to his public position that he wants to see a comprehensive package of entitlement reforms and spending cuts in order to get his vote to raise the debt ceiling, while Democrats would like to see some balance of tax increases and cuts in order to reduce the deficit and debt. McConnell argued Wednesday that Democrats have no path to raising taxes — citing a failed proposal by Sen. Chuck Schumer, D-N.Y., to raise taxes on people making more than $1 million in December 2010 during the debate over extending the Bush tax cuts. Schumer’s party controlled both chambers of Congress, but Congress rejected his proposal and President Obama agreed to extend the Bush tax cuts for two years.

That point of debate underscores the conflict behind the Biden talks — with Republicans demanding only cuts, and Democrats wanting a mix of cuts and revenue increases, someone has to give before the deadline or the country will be in worse financial shape than it is now, according to Bernanke’s assessment.

The outcome of the biggest debate in Washington remains murky, with the Biden group members sharing very little of what goes on behind closed doors. But while McConnell would rather not talk about what happens if the country defaults, Democrats will do whatever they can to gain leverage by painting him and his party as the group risking catastrophe.