Idaho GOP Sen. Mike Crapo told U.S. Treasury Secretary Jack Lew Thursday that he understands the near-term fight over raising the debt limit is a serious concern for the American economy, but pressed Lew to acknowledge the underlying $16.7 trillion debt is a far bigger threat.
“The real crisis is that default — the one that we are screaming toward because of our refusal to engage as a country, Congress and the president — with regard to reforming our failed entitlement system, reforming our failed tax policy in this country and dealing with the real debt crisis that we face,” Crapo said during a Senate Finance Committee hearing.
“Don’t you believe that the long-term trajectory of our debt gives our economy a greater threat and gives investors even more concern in terms of their confidence about the ability of the United States to avoid default?” Crapo asked.
Lew acknowledged long-term debt challenges but said considerable progress has been made, citing an annual deficit equal to 4 percent of gross domestic product, down from 9 percent during the recession.
“I very much agree that we should be dealing on a bipartisan basis — and you and I have talked about this,” Lew continued. “Sensible, balanced approaches for medium- and long-term reforms. And I would love to be engaged in that conversation. It is not the crisis that we’re talking about, it is a challenge.”
Crapo replied that the lower annual deficit came at the price of tax increases and cuts in discretionary spending. “We have not dealt with entitlements, which the administration seems to say are off the table, and now we’ve got even more demands for great tax hikes,” Crapo said. “And that’s what the negotiations that we want to engage in are about.”
Lew said President Obama has “engaged on multiple occasions,” including in 2011 and 2012. “We very much believe that a balanced approach where you do entitlement reform and you do tax reform would be good for the country….We’re ready to try again. The president said when we take away the threat of economic disaster he’s ready to engage.”
Added Lew: “He’s willing to talk, wants to talk, but it can’t be that it’s with the U.S. economy being threatened if one small part of Congress doesn’t get its way.”
Crapo: “So we need another trillion or more of debt authorized before we can even discuss whether to start reforming entitlements, whether to star reforming the Tax Code?”
Lew: “Senator, what we believe is the government needs to open, Congress needs to open the government, and Congress needs to make it possible to pay our bills and we need to engage. And we’re ready to do that.”
Crapo: “Back to the issue of our long-term debt and threat that is poses to our economy. Are you telling us that those fears have now been allayed?”
Lew: “No. Senator, what I tried to say — and I hope I wasn’t confusing — there is a challenge to deal with in the medium and long term. It is not the same as a crisis, which is what happens if you fail to act on the debt limit in the next short period of time.
“I would very much like to do it sooner rather than later. I think it’s better for the country. It would have been better for the country if we had been able to complete the negotiation where the president and the speaker were very close until House Republicans said they wouldn’t vote for it. We would love to be in a place where we were talking about a sensible alternative to these mindless across-the-board cuts. We’ve been very clear about that.
“But it can’t be the threat that the government is being shut down and we’re going to default on our bills. That is not the way to engage in the kind of bipartisan negotiations that we need to happen.”