“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.
“We have said and continue to say that we believe both are important priorities and both can proceed concurrently,” Carney told reporters.
The vote came one day before the entire House GOP caucus is due to meet with Obama at the White House, the first such meeting since Republicans seized control of the House in the midterm elections last fall. Carney said Obama plans to listen to their concerns but will also underscore their duty to the nation by citing a letter that President Ronald Reagan sent to Capitol Hill demanding a debt limit increase in 1983.
“The risks, the costs, the disruptions and the incalculable damage lead me to but one conclusion: The Senate must pass this legislation before the Congress adjourns,” the letter says. Carney added: “We agree with Ronald Reagan and many others that we cannot default.”
Meanwhile, debt-reduction talks between the White House and congressional leaders are underway, led by Vice President Biden. Last week, Biden said the group is on track to produce an agreement that would trim at least $1 trillion from projected budget deficits over the next 10 to 12 years. That would be the biggest debt-reduction package since at least the start of the Clinton administration, when a Democratic Congress approved spending cuts and tax increases estimated to reduce deficits by $433 billion over five years.
This time around, negotiators have agreed to consider pulling about $200 billion in savings from various programs, including federal worker pensions and farm subsidies. They are also eyeing the nearly $800 billion that Obama has offered to cut from domestic agencies over the next 12 years.
Beyond that, their work gets much tougher. Biden said the White House will insist on new tax revenues, despite the adamant opposition of Republicans. And Republicans are demanding significant cuts to Medicare, the biggest driver of future borrowing, despite stiff resistance from Democrats.
Democratic leaders not only want to protect health benefits for seniors but also are eager to capitalize politically on an unpopular GOP proposal to replace Medicare with private insurance subsidized by the federal government.
The GOP’s Medicare plan was a key factor in a Democratic victory last week in a special election in a conservative House district outside Buffalo, and Democrats are worried that a White House deal to cut Medicare spending could spoil a ripe opportunity for them to gain ground on Republicans.
With Obama set to host House Democrats at the White House later this week, Hoyer fired a warning shot Tuesday, cautioning the president not to forge any agreements with Republicans without input from his caucus.
“We are expecting to be full participants in any of the decisions that are made with reference to what we will or will not support as Democrats,” Hoyer told reporters. “We want to see our Medicare system strengthened, not eliminated.”
Staff writer Felicia Sonmez contributed to this report.