Representative Nan Hayworth on the Debt Ceiling

Welcome to Politics Bites, where every afternoon at It's A Free Country, we bring you the unmissable quotes from the morning's political conversations on WNYC. Today on the Brian Lehrer Show, Nan Hayworth, Congress Member (R-NY-19) discusses the battle in Congress over raising the debt ceiling.

President Obama has put the country on notice—Social Security and other government checks may not be issued three weeks from now if the debt ceiling isn't raised

The federal government has committed to spend more than it will take in. If the government cannot raise the debt ceiling by August 2, the U.S. faces possibly defaulting for the first time ever on its national debt. The president yesterday said unless there is resolution, checks for Social Security, disability and veterans benefits might not go out as scheduled.

Congressional republicans want trillions of dollars in long-term spending cuts in exchange for raising the ceiling, with no new taxes or tax-code changes. Rep. Nan Hayworth agrees with that stance. She called the president’s language last night “troubling.”

He is essentially trying to strike fear into the hearts of Americans who should be reassured that all of us who care about the soundness of our approach to debt and deficit would certainly honor the obligations that we have to our seniors, to our veterans, and of course, to paying our sovereign debt.

Hayworth anticipates that the president and congress will reach an agreement before default happens. She believes that the debt ceiling does need to be raised, but responsibly.

Responsibly means that we need to have at least dollar-for-dollar spending cuts for every dollar by which we raise the debt ceiling, and that we cannot include new taxes. Those are counter-productive. Revenues will grow organically when we allow Americans to reenter the workforce.

Hayworth finds it odd that President Obama has stated that he understands that increasing taxes will not improve the economy, yet he still wants to do it. She believes “he’ll come around.”

The president has said that closing some tax loopholes would not hurt the economy and would, in fact, be beneficial. Senate Republican Leader Mitch McConnell seems to agree that default is an option, while GOP Senator Jim DeMint has said that even if that deadline doesn’t get met, the United States would not immediately default. DeMint said Secretary Geitner has been irresponsible to suggest that the country would default

Hayworth agreed that Geitner was irresponsible.

I agree with Senator DeMint that Secretary Geitner and the president should not make such threats, there’s no question. But I also agree that we would need to prioritize.. the obligations that are critical.

Mayor Bloomberg has said a default would have “a catastrophic effect” here in New York. Hayworth agrees, and thinks a “flatter, fairer” tax code is necessary. She took issue with House Speaker John Boehner’s negotiations with the president regarding closing tax loopholes. Hayworth said loopholes are created as a way to evade the high corporate taxes here in the United States, and that rather than closing loopholes, the government must lower the taxes.

Otherwise we are increasing the net burden on our enterprise economy… We don’t want to have a jolt that takes working capitol out of the economy that desperately needs it.

Hayworth believes that the United States should be “prudently reducing” military obligations, given the current economic fragility, and said that she opposed funding intervention in Libya. Referring to the two wars that Congress allowed President Bush to fund off-budget, through borrowing, the congresswoman said both parties have made mistakes, but looking back is not constructive.

Both parties have done things or undertaken obligations that were unwise either at that time or in retrospect, but I would certainly contend that the Libyan engagement is one that we have to look at now…It’s not productive for us to try to retrograde. Clearly, I would not—knowing what I know about Iraq—I would not have voted to support that intervention, but that is not relevant to our current situation except in so far as we view these current military expenditures within the current budget.

A caller from Brooklyn asked Rep. Hayworth what proof there is that tax cuts cause job creation, particularly given that after President Obama continued the Bush tax cuts, no jobs were created. While Hayworth has said that she believes tax cuts will create more revenue for the federal government, that belief flies in the face of a statement from former Reagan budget director David Stockman, who said that was never true. Stockman said that except for in the case of very specific small categories, cutting taxes is actually a strategy for “starving the beast” — curtailing the revenue available for the federal government to administer programs unpopular with conservatives.

Hayworth answered that the federal government’s spending is a part of the economy.

The multiplier effect of a dollar spent by the private economy is greater than that of a dollar spent by the federal government, and certainly those of us who have experienced the work of bureaucracies can recognize this intuitively. You don’t make the economy productive by cycling dollars through a bureaucracy.

She said only two interventions can stop an economic crisis, cutting taxes or cutting spending. She also thinks progressive taxation is harmful.

The closer we bring our tax structure to being flat, the better we’ll all be... When you have a flatter structure, when you have more of us participating in the federal revenue collection, if you will... then those who may earn more will save and invest more, and that’s what we want.

While the current system of mortgage interest deductions is neither progressive not flat but regressive, Hayworth does not agree that flattening the deduction system without changing the tax code is a good idea.

I want to see no net tax increases, we can’t afford it…. Federal government never manages to collect more than nineteen percent of gross domestic product in taxes anyway. People ill do things to avoid tax burdens. Lets get them investing in the active economy.