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Alice Rivlin: Debt Ceiling Shouldn't Be Raised Without Long-Term Plan

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RIVLIN
AP

WASHINGTON -- Democratic economist Alice Rivlin said Sunday the debt ceiling increase should be paired with a long-term plan for dealing with the deficit, a strategy currently being pushed by congressional Republicans.

"There's no mystery about what we ought to do, we just need to get on with it," Rivlin, who served as budget director under President Bill Clinton, said on CNN's "State of the Union." "At the same time we raise the debt ceiling, we need to put in place this long term plan."

The government reached its debt limit, a congressional authorization for the amount in loans that can be taken on by the Treasury, on May 16. Both chambers of Congress are currently working with the White House to come up with a deal for raising the debt ceiling in exchange for spending cuts and entitlement changes after Republicans in the House blocked a bill that would have raised the debt limit without preconditions.

Rivlin and former Congressional Budget Office Director Douglas Holtz-Eakin, who also appeared on "State of the Union," both said they were concerned Congress would not come up with a good plan to bring down the deficit by Aug. 2, the date that Treasury Secretary Timothy Geithner has said the government would begin to default on its loans.

Rivlin called default "unacceptable," referencing Moody's Investors Service's recent announcement that it may soon downgrade the U.S. government's credit rating over concern that it might default on its loans.

"Moody's is right to be worried," she said.

Rivlin also cautioned against tying a debt ceiling hike to short-term tax increases or spending cuts, both of which have been proposed by Democrats and Republicans in Congress.

"We don't have to cut near-term spending too much -- we shouldn't do that, because it would endanger the recovery," she said. "If you just slash spending right now, or raise taxes right now, it would be a very bad thing to do."

More important is creating a plan for the future and legislating on it "so the world knows that we're taking serious steps to get our long-term deficit under control," she said.

Although Holtz-Eakin called Rivlin "an unusually sensible representative from the lefter wing of the economics profession," he disagreed that short-term cuts would be bad for the economy.

"The trouble is on Capitol Hill you are seeing this dichotomy," he said. "You're not hearing the Democrats say, 'We agree, we're going to change entitlements, we agree that we're going to get tax reform done.' They're saying no to both of those."

Rivlin said a long-term plan should "absolutely" include cuts to Medicare, a program that provides health coverage to those 65 and older. But she did not comment on a contentious plan by Republican Rep. Paul Ryan to turn Medicare into a voucher-like system for future seniors.

Although Ryan (R-Wis.) touted working with Rivlin -- the two worked together previously on a different deficit-reduction effort -- Rivlin has said that she does not support the version of Medicare in Ryan's 2012 budget proposal.

"We need to restructure Medicare and Medicaid so they aren't growing as quickly in the future," Rivlin said on Sunday. "There are different ways of doing that."

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