CHICAGO (Reuters) - Moves to tie a reduction in the U.S. deficit to raising the federal government’s debt ceiling is “quite insane,” the top White House economist said on Wednesday.
“We must address our long-run fiscal challenges,” Austan Goolsbee, chairman of the White House Council of Economic Advisers, said in a speech in Chicago. “But to tie this to the debt limit is in my view quite insane.”
Conservative Republicans, especially Tea Party activists, have refused to support an increase in the nation’s $14.3 trillion borrowing limit before winning budget concessions, including steep domestic spending cuts to reduce a deficit projected at $1.4 trillion this year.
A number of Democrats agree that there should be no increase in the debt limit without spending cuts.
Goolsbee gave a largely optimistic outlook on the U.S. economy, even while noting the country’s fiscal problems.
The U.S. recovery is gaining steam, he said, which should reduce the short-term deficits caused by the worst economic downturn since the Great Depression.
Although higher fuel prices, a housing sector “in the dumps” and state and local government spending cuts are slowing the recovery, a broad swath of private businesses are adding jobs, Goolsbee said, adding that the resurgence in oil prices is in part due to a reviving global economy.
“I view these positives as vastly more important than the headwinds we face,” he said.
At the same time, the long-run fiscal problems must be addressed, preferably by identifying a number at which the debt-to-GDP ratio stops rising and begins falling, he said.
But the debt ceiling is a completely separate issue, unrelated to the need to trim the deficit, he said.
“To hit the debt ceiling is like trying to lose weight by cutting off your head,” he said. “If we are within 50 feet of the debt ceiling, the market is going to light on fire.”
Treasury Secretary Timothy Geithner is preparing special funding maneuvers to avoid default and delay the hard deadline for raising the debt ceiling to August 2.
Reporting by Ann Saphir; Editing by Leslie Adler