McDonnell Blames White House for Debt-deal Stalemate

July 27, 2011

Gov. Bob McDonnell positioned himself Tuesday on the right flank of the Republicans' battle lines against President Barack Obama in the increasingly heated rhetoric over raising the nation's debt limit.

He also served notice that he will try again to force state employees — who have not seen a net increase in take-home pay in years — to pay more into the public retirement fund.

The conservative governor, speaking during his monthly radio show on Washington's WTOP, accused the White House of "ineptitude" and injecting politics into the debt limit debate with one week left to raise the borrowing ceiling or default on U.S. obligations for the first time.

"This administration finds ways to kick the can down the road and to inject politics into the equation. There is an ineptitude in this administration on how to get things done," said McDonnell, who has been mentioned as a potential 2012 GOP vice presidential running mate.

And after some Republicans rebuked him a week ago for urging bipartisan compromise on revenue, McDonnell emphatically said Tuesday that new taxes should not be in the mix.

He did not advocate higher taxes during a news conference last week, but left his intent open by urging Democrats and Republicans to find a compromise before next Tuesday's deadline.

Without a higher debt limit, the Treasury can no longer borrow money to pay its bills after the current $14.3 trillion limit expires next Tuesday.

"These people have overspent for 30 years. Republican and Democrat presidents have all contributed to the debt increase and now they want more money? I say they've got to find a way to get it done, and in a perfect world they get it done without tax increases," McDonnell said.

McDonnell's sense of urgency was heightened by a letter last week from Moody's Investor Services notifying him that Virginia and Maryland were among five states under review for a possible downgrade of their perfect AAA bond ratings should the debt crisis force a downgrade of the federal government's creditworthiness.

Virginia's bond rating has been perfect since 1938, the first year agencies rated the debt capacity of the government. Like Maryland, Virginia is tied closely to federal spending on military bases, to the federal employees who reside just outside Washington and to the defense and government contractors that have proliferated in the suburbs around the capital.

On state issues, McDonnell said state government employees may have to sacrifice more to protect Virginia's public pension fund, which has an unfunded liability of $18 billion.

"I tried to fix it last year, the General Assembly went along with half of it," McDonnell said. "I think we could have some additional shared employee payments (and) we need to do some other things to get it solvent long term."

In his budget proposal last December, McDonnell recommended government employees pay 5 percent toward their Virginia Retirement System pension accounts. He proposed a pay increase of 3 percent to soften the blow, resulting in a net 2 percent cut in state employee take-home pay. The budget the House and Senate adopted retained the 5 percent employee contribution, but boosted the raise to 5 percent, holding state workers harmless. That, McDonnell said, was "essentially a wash."

"We've got long-term structural problems and we're going to have to make some changes, whether it's an optional defined contribution or changing some benefits or some other things," he said.

McDonnell also commented publicly about a covertly made video posted on the Web site of the conservative "Project Veritas" last week that shows a Richmond Medicaid worker instructing a man posing as a Russian drug smuggler not to mention narcotics or prostitution enterprises on his benefits application form. McDonnell said he had not watched the video, but asked police to review it. Attorney General Ken Cuccinelli's Medicaid Fraud Unit is also investigating.

"We cannot have people instructing people to break the law in order to qualify for state benefits," McDonnell said.

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