Beebe: U.S. default could create financial disaster

Gov. Mike Beebe on Tuesday said a possible financial default resulting from failure to raise the federal debt ceiling would create a financial disaster equal to a major earthquake along the New Madrid fault.

Beebe was interviewed Tuesday on several topics during a 30-minute Q&A session on “Talk Politics,” hosted by Roby Brock.

Raising the U.S. debt ceiling has consumed national politics during the past few weeks. President Barack Obama and Democratic members of Congress say not raising the debt ceiling could cause international markets to panic. Such panic could halt economic recovery in the U.S., or push the economy back into a recession.

Congressional Republicans say the spending cuts should be enacted to keep the U.S. under the current $14.3 trillion debt ceiling. They also say the Obama Administration has enough money coming in through the Treasury to pay the interest on debt, meaning not raising the debt ceiling does not send the U.S. into financial default.

In a Pew Research Center poll released Monday (July 11), 47% of Americans said stopping increased government spending and avoiding a larger national debt are more important than raising the debt ceiling. Only 42% preferred raising the debt ceiling.

Beebe said both parties need to find common ground, and said not pushing the ceiling higher could create “global public panic.”

“These people better get together. The American people expect them to get together … The people will lose if they don’t get together,” Beebe said.

He said his staff has had internal discussions about adjustments “in the event of an economic downturn” resulting from a default. Comparing a U.S. default to a catastrophic New Madrid earthquake, Beebe said there would not be much the state could do in the event of economic panic.

HISPANIC DISTRICT
Creating a Hispanic legislative district in Northwest Arkansas has been discussed as part of the ongoing legislative redistricting process. Beebe, Attorney General Dustin McDaniel and Secretary of State Mark Martin are members of the 3-member apportionment board responsible to redraw Arkansas’ legislative districts.

“We’re looking at precisely that,” Beebe said when asked about creating a Hispanic district. “It’s an option on the table.”

However, Beebe said there are some complicating factors. He said there could just be a population of voting Hispanics to create an Hispanic “influence district” instead of a district with a majority Hispanic population.

Beebe acknowledged the criticism from those who believe districts should not be crafted to represent any group, but said if it’s “fair and reasonable,” he would support a Hispanic district.

UA CHANCELLOR, HIGHER EDUCATION
Beebe said he will not try to “influence overtly” the process of hiring a new president for the University of Arkansas system, but does give his thoughts on each person when asked.

The candidates for the prestigious post are: Dr. Donald Bobbitt, provost and vice president for academic affairs at the University of Texas at Arlington; Dr. John Churchill, secretary of the Phi Beta Kappa Society and a former academic dean at Hendrix College; Dr. Frank Oldham, former chairman and CEO of American State Bank; Stanley Reed, former president of the Arkansas Farm Bureau.

Criticism following the recommendation to hire former State Sen. Shane Broadway as the next director of Arkansas Higher Education was expected, Beebe said.

Republicans have said Broadway, who served 6 months as interim director in the department of Higher Ed after the departure of Jim Purcell, does not meet the qualifications and is nothing more than a political appointee.

Beebe, who said a national search was not conducted, did not back away from his recommendation that Broadway be the next director.

“In my opinion, he is the best person to run the department at this time,” Beebe said, adding later that he and his office “knew what the criticism was going to be when we did it.”

BUDGET ISSUES
“No,” Beebe said quickly when asked if he would consider returning all or some of the $94 million in surplus tax collections.

Beebe followed the answer by reminding Brock that no Arkansas governor has lowered taxes — primarily through the reduction in sales tax on groceries — more than he has.

“I’ve got a track record of cutting taxes,” Beebe said.

Continuing, he noted: “At the same time, we have a fiscal ship to run … that $94 million is going to be needed … to plug holes.”

He said the budget “holes” could appear in Medicaid and prison costs. He also said the surplus could be used to shore up funding for Arkansas’ foster care system.

Beebe received criticism after recently insinuating that newly enacted tax cuts resulted in less funding for parents who foster children with therapy needs. The Arkansas GOP and Republican members of the Arkansas Legislature said Beebe made the statement to punish them for seeking $35 million more in tax cuts than he proposed.

During the Tuesday interview with Brock, Beebe said he supported the $35 million in cuts as a “firewall” against more than $100 million in cuts the Republicans initially proposed.

OTHER TOPICS
• Beebe said a special election in Arkansas House District 54 between Democrat Hudson Hallum, Republican John Geelan and Independent D’James Rogers will have a broader political impact if Geelan wins big in the district that traditionally votes Democratic. He had no comment on allegations of election fraud, but said the state has a responsibility to react “fairly and honestly” to review all claims of election problems.

• Beebe said he does not regret his recent address to the Stonewall Democrats. Beebe told the lesbian, gay, bisexual and transgender (LGBT) Democrats — a caucus of the Democratic Party of Arkansas — that he did not support same-sex marriage.

“They knew before I got there what my position was on same-sex marriage,” Beebe said. “All you can do is tell people what you think and live with the consequences.”

• Beebe said he is neutral on what will be a public vote on raising Arkansas’ severance tax. The question of raising the tax to a flat 7%, pushed by Sheffield Nelson, will be on the November 2012 general election ballot. However, Beebe said Arkansans should consider the recent severance tax increase and the possible effect on natural gas exploration in Arkansas with another increase. In 2008, the Arkansas Legislature raised the tax, pushing collections from about $600,000 a year to about $50 million a year, Beebe said.

“I certainly have no objection to folks being able to vote on a higher one (tax),” Beebe said Tuesday.

• Beebe said he wishes the state could have the revenue the Arkansas Game & Fish Commission collects from natural gas leases on state property managed by the commission. But Beebe said the people of Arkansas decided long ago that the commission be autonomous.

“Could we use some of that money for critical areas? Yeah,” Beebe said.