The new year has just begun and already a fight between Democrats and Republicans on the debt ceiling has emerged. Some time in the next few months the Congress will have to raise the United States debt ceiling to avoid sending the country into default. Some have warned that such a default would have catastrophic consequences for the economy, even worse than the financial crisis of 2008. Raising the debt ceiling is never popular, but it will be even more painful for Republicans who were elected on a platform of reducing the federal debt. Today Senator Lindsey Graham (R-SC) threatened to vote no on any debt ceiling raise that is not accompanied by cuts to Social Security.
In an interview on the Meet the Press this morning Graham stated he will not vote for a debt ceiling raise unless the retirement age for Social Security is raised. Right now the age of eligibility for Social Security is 65. Republicans would like to see that age risen to 67 or 68 over time in order to save money. Democrats argue that Social Security has more than enough money to meet its current obligations for decades to come, and that raising the retirement age would force people to work longer. In addition, Graham states that Social Security will have to be “means tested” in order for him to approve a debt ceiling raise. For those unfamiliar with “means testing,” it is method by which the rich are excluded from receiving Social Security benefits.
Democrats in the House and Senate are sure to oppose the efforts of Graham and other Republicans to cut Social Security. Democrats argue that Social Security has plenty of assets to remain solvent until at least 2030, and that the program will still mostly pay for itself after that. Democrats would also enjoy the political benefits of the fight. Democrats suffered from a loss of older American voters in the 2010 midterms after the infamous “death panels” debate. A fight over Social Security could give Democrats a chance to regain their reputation as the defenders of the elderly. The Obama administration has also objected to holding the debt ceiling hostage to any kind of cuts, given the potential consequences of a default.
As a Senator, Graham will hold filibuster power over a possible debt ceiling raise. As a result, 60 Senators, and at least seven Republicans, will have to vote to end his filibuster to raise the debt ceiling over his objections. A standoff type situation is already developing which could dramatically affect the American economy in 2011.