“Tonight’s vote illustrates that there is no support in the People’s House for a debt limit increase without real spending cuts and binding budget process reforms,” House Majority Leader Eric Cantor (R-Va.) said in a statement, adding: “The families and business owners throughout the country want Washington to begin to live within its means and stop maxing out the credit card.”
Polls show that a higher debt limit is extremely unpopular with a large majority of voters, which has left Democrats leery of calling for an increase. On Tuesday, as the House voted 318 to 97 against raising the limit, nearly half of the chamber’s Democrats sided with the Republicans. In doing so, they ignored a long-standing request from the Obama administration to boost the limit before plunging into a complex and politically difficult battle over the size of the federal budget.
“I don’t intend to advise our members to subject themselves to a 30-second political ad and attack,” House Minority Leader Steny H. Hoyer (D-Md.) said hours before the vote, noting that GOP leaders offered the bill with the intention of letting their party’s members vote against it. Seven Democrats voted “present” to protest the manner in which the Republican majority called up the bill.
Hoyer and other Democrats accused House Speaker John A. Boehner (R-Ohio) of toying with the issue and running the risk that the “no” vote could roil financial markets. Bond traders, however, appeared to pay little attention to a move that many observers on Wall Street and in Washington dismissed as political theater.
“I didn’t even know they had a vote tonight, to be honest with you,” said Ian Lyngen, a senior government bond strategist at CRT Capital Group in Stamford, Conn. “The only real event that the market is focused on is the point at which they run out of money and have to shut down the government” — a date that Treasury Secretary Timothy F. Geithner has fixed at Aug. 2.
On that date, without additional borrowing authority, Geithner has said, the Treasury would be forced to default on at least some of the government’s obligations, an outcome that could have far-reaching consequences for global financial markets and the U.S. economy.
White House press secretary Jay Carney said Tuesday that default would be “calamitous.” But he dismissed the evening vote, saying Obama believes that Congress ultimately will act both to raise the debt ceiling and to rein in future borrowing.