STEVE INSKEEP, Host:
David, good morning. Happy New Year.
DAVID WESSEL: Happy New Year, Steve.
INSKEEP: So do the Republicans in the House, controlling the House, know what they want to do when it comes to economic policy?
WESSEL: They're going to pass a bill next week, probably, that will repeal the Obama health care initiative. They know it won't get through the Senate, and they haven't said how they would propose to cut health care spending or maintain access for people who are uninsured or deal with aging or technology. So they know what they want, they just haven't been able to explain to us the specifics.
INSKEEP: Well, it's interesting you say rhetorically they know what they want to do, because when they talk about cutting spending, aren't economists saying that government spending in the short-term - not the long-term - but in the short-term has actually been helpful to the economy?
WESSEL: Well, that's true. Keynesian economists and those who work for the president think government spending has been an important part of offsetting the depressed private demand. They don't quite subscribe to that theory, and the kind of spending cuts they're talking about they think are wasteful spending or spending that people don't want. They're taking their cue from the voters who said that - in their opinion - that government got too big.
INSKEEP: So what are the likely earliest points of conflict here?
WESSEL: Well, there's going to be some fights over what's called rescissions, repealing spending that's already been approved by Congress, such as the 12 billion or so remaining of the original Obama stimulus. There is this need to keep the government going to fund the government after March. The current authorization expires in March. And the Republicans say they want to cut $100 billion out of spending other than Defense veterans and national security. That would mean a 20 percent cut in everything else. That seems pretty heroic. And finally, there's going to be a confrontation about raising the debt ceiling. It's now at $14.3 trillion. The government's likely to hit that level in March or April. Speaker Boehner says they're going to do it. They're not going to let a government default. But the question is: What conditions will Republicans put on that in order to make this must-pass legislation get through?
INSKEEP: Oh, you say default because the government is in such a situation that it would need to borrow more to be continuing to pay its existing debts. That's the situation.
WESSEL: Exactly. Exactly. Even if they cut spending now, they can't cut the deficit to zero. That means they'll be borrowing more, and they need authorization to do that.
INSKEEP: We've talked about some of the points of conflict. I wonder if we get to an issue like free trade, is there an area where the administration and Congress, Republicans in Congress, might find common ground?
WESSEL: There might be. You know, there's a pending South Korea free trade agreement. There's likely to be opposition, both from liberal Democrats and some populist Republicans. If it passes, it will only pass because President Obama and the leaders of the Republican Party in Congress find some of their members willing to vote for it. I suspect that won't be partisan. It'll be contentious, but it won't be a Republican-versus-Democrat thing.
INSKEEP: David, thanks very much, as always.
WESSEL: You're welcome.
INSKEEP: David Wessel is economics editor of The Wall Street Journal and a regular guest here on MORNING EDITION. Transcript provided by NPR, Copyright NPR.
