The White House tacitly endorsed the proposal Tuesday, issuing a statement that said Obama “would not oppose” the temporary respite. The president has called for a long-term extension of the Treasury Department’s borrowing authority, which he argues would “increase certainty and economic stability.”
But, White House press secretary Jay Carney said, “clearly, we support extension of the debt ceiling without drama or delay.”
Senate Majority Leader Harry M. Reid (D-Nev.) also welcomed the proposal. “I’m glad,” he told reporters, “we’re not facing crisis here in the matter of a few days.”
Under the proposal, the legal limit on government borrowing — now set at $16.4 trillion — would remain intact, but its enforcement would be suspended until May 18. In the meantime, the Treasury could continue borrowing to cover the cost of Social Security checks, the military payroll, interest payments to the nation’s creditors, and other obligations.
The approach — unprecedented since World War II — would let Republicans avoid a debt-ceiling fight, which could be politically and economically damaging, without endorsing a higher limit.
On May 19, the debt limit would automatically be reset at a higher level that reflected the additional borrowing. Treasury officials could then begin taking what they call “extraordinary measures” to continue paying the nation’s bills, probably pushing the new default deadline into late July or early August, independent analysts said.
Without congressional action, the Treasury predicts that it would run out of money to pay the nation’s bills by early March. That would lead to the U.S. government’s first default, which, economists say, would invite a new recession, damage American credibility abroad and potentially destabilize world financial markets.
If Congress approves the GOP measure, lawmakers would still face other painful deadlines, including the imposition of sharp automatic cuts in government spending on March 1 and a potential government shutdown on March 27.
Missing either of those deadlines would hurt U.S. economic growth, but neither would have the calamitous effects of a government default, said Joel Prakken, chairman of the independent forecasting firm Macroeconomic Advisers.
“The world’s a little safer with that debt ceiling pushed off for six months or so,” he said.
The government came perilously close to default in the summer of 2011, when Republicans gained control of the House and used the debt limit to force Obama to approve more than $2 trillion in spending cuts over the next decade. Burned by the president’s successful campaign to raise taxes on the wealthy during the recent fiscal-cliff negotiations, some Republicans were threatening to once again use the debt limit to extract new concessions on spending.
But last week, under pressure from business leaders and some prominent Republicans, House Speaker John A. Boehner (R-Ohio) announced that he was developing a plan to postpone a new debt-limit clash. In exchange, he demanded that Senate Democrats revive the traditional budget process, which they have neglected for nearly four years.
The GOP proposal calls for the Democratic-controlled Senate to adopt a budget by April 15 or have senators’ paychecks held in escrow until this session of Congress ends in early 2015.
Late Tuesday, House leaders sought to build support for the measure in a closed-door meeting with their rank and file, repeatedly offering the rallying cry, “No budget, no pay.”
Rep. Cathy McMorris Rodgers (R-Wash.), the conference chairman, played a series of television news clips about GOP pressure on the Senate, telling the often fractious caucus that the new strategy already shifted attention to the Senate’s inability to perform one of its most fundamental duties.
Boehner told reporters after the meeting: “We’ve done our budgets, but it’s been nearly four years since the Senate has done a budget. Most Americans believe you don’t do your job, you shouldn’t get paid.”
Meanwhile, he assured wary conservative Republicans that he would hold firm against any attempt to undo the automatic spending cuts without “cuts and reforms to replace it,” according to a source in the room.
And he vowed that House Budget Committee Chairman Paul Ryan (Wis.), the party’s 2012 vice presidential nominee, would draft a new budget blueprint that would wipe out deficits “within a decade.” The austere budgets Ryan offered in years past took nearly 30 years to balance.
“It’s time for us to come to a plan that will in fact balance the budget over the next 10 years,” Boehner told reporters afterward. “It’s our commitment to the American people.”
After the meeting, lawmakers offered broad enthusiasm for the new strategy. A smattering expressed opposition, suggesting that the measure’s passage may not be assured.
But even Rep. Raul R. Labrador (R-Idaho), a hard-line conservative who often bucks House leaders, said the promise of a balanced budget allayed his concerns about agreeing to extend the debt limit for a few months.
Now, Republican leaders “actually have an agenda,” Labrador said. “The agenda is to get to balance in 10 years, to have a balanced budget.”
Balancing the budget over the next decade, however, is likely to require extraordinarily deep cuts in spending that go even further than reductions in previous House budgets. In the past, Ryan has targeted spending on health care for the poor and other social safety net programs, such as food stamps and aid for college tuition.
On Monday, Obama vowed in his Inauguration Day speech to defend those programs.
Instead, senior Democrats say they want to revive the budget process to clear a path for raising additional tax revenue from corporations and the wealthy. Although Congress agreed earlier this month to raise tax rates on income over $450,000 a year, that measure will generate only about $600 billion over the next decade, just over a third of Obama’s $1.6 trillion target for new tax revenue.
Even as they moved toward an agreement to temporarily resolve the problem of the debt limit, lawmakers have offered no new ideas for bridging the vast ideological chasm on taxes and spending.
Ed O’Keefe and David Nakamura contributed to this report.