House Republican Speaker John Boehner gave an important policy speech on the debt ceiling Monday at the Economics Club of New York. This is probably the key paragraph (taken from an advanced look at the speech): “So, let me be as clear as I can be. Without significant spending cuts and reforms to reduce our debt, there will be no debt-limit increase. And the cuts should be greater than the accompanying increase in debt authority the president has given. We should be talking about cuts of trillions, not just billions.”

Getty Images John Boehner (R)

In plain English, Mr. Boehner is making this suggestion: Let’s say there’s a $2 trillion debt-limit increase proposed by the administration. In that case, there would have to be $2 trillion-plus in spending cuts in order to get Republican support. This is tough stuff.

By the way, the speaker argues that only tax hikes are off the table in the debt-ceiling discussion. He also insists that any debt deal must “reform the budget process.” However, the speaker does not specify budget-process reform.

That’s where there’s gonna be a big debate between an administration that wants deficit targets and many Republicans who want spending caps as a share of GDP. The former could still allow for tax hikes in the form of eliminating deductions, credits, and other so-called tax expenditures. It would seem that Boehner rules this out, but he does not explicitly say so. A spending cap, however, whether as a share of GDP or as a targeted level of some sort, would rule out any tax increases at all.

The White House believes that eliminating tax expenditures is a spending cut through the tax code. But unless this is accompanied by tax-rate reductions, it’s an anti-growth tax hike.

In terms of the overall budget going beyond the debt ceiling, Boehner talks about pro-growth tax reform and overhauling the code. He even quotes President John F. Kennedy in 1962. Speaking before the Economics Club of New York, JFK talked about the need to lower tax rates in order to generate more revenues to balance the budget.

Kennedy believed in the supply-side incentive model, and Boehner does too. But tax reform will not be part of the debt-ceiling discussion.

Finally, Boehner does state that “allowing America to default would be irresponsible. . . . But it would be more irresponsible to raise the debt ceiling without simultaneously taking dramatic steps to reduce spending and reform the budget process.”

So Speaker Boehner lays down the gauntlet. You want to raise the debt ceiling? Then we need an equal amount of spending cuts to go along with the higher borrowing authority. It looks like a good start. But of course, the Joe Biden talks will go on.

We’ll see what happens next.

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