‘Fiscal cliff’ talks turn on borrowing limit
As Republicans consider making a strategic retreat from their traditional opposition to higher taxes, a new flash point is emerging in the high-stakes budget negotiations: the legal limit on government borrowing.
President Obama is not only insisting that Republicans agree to higher tax rates for the wealthy. He also wants any deal that would avoid the year-end “fiscal cliff” of automatic spending cuts and tax hikes to also address the $16.4 trillion debt limit. Federal borrowing is on track to hit that limit early next year.
Without an increase in the debt ceiling, the government would default on its obligations. Republican lawmakers, sensing that this gives them bargaining power in the budget talks, are resisting any increase in the limit unless the White House makes concessions, such as agreeing to deep spending cuts.
House Speaker John A. Boehner (R-Ohio) has said that any increase in the debt ceiling should be matched dollar for dollar with new spending cuts. Earlier this week, Boehner made an offer to the White House that called for $2.2 trillion in deficit reductions, not enough to offset the increase in the debt limit that’s needed.
Boehner has heard from conservative Republicans in the House that they would not vote for a deal that included a debt-limit increase, particularly if they were already being asked to back new taxes.
Even if Republicans concede on tax increases — agreeing to let tax rates rise for the wealthy while extending middle-class tax cuts, as Obama wants — they would still retain significant leverage early next year as the nation approaches the debt limit. That prospect has added urgency to Obama’s push to address the debt ceiling now.
Obama is trying to marshal influential business leaders — who are scared of repeating last year’s economy-rattling debate over the debt ceiling — in an effort to pressure Congress to address the debt ceiling now. White House spokesman Jay Carney said Thursday that he expects the business community’s objections to a debt-ceiling showdown to intensify if no agreement is reached with Congress.
Aides to Obama and Boehner said Thursday that the two sides had reopened talks on the fiscal cliff for the first time in a week but provided no details. The resumption came after Obama called Boehner on Wednesday.
In an opening bid last week, Obama called for essentially shifting the responsibility for raising the debt ceiling from Congress to the president. Obama’s proposal was modeled on one originally crafted by Senate Minority Leader Mitch McConnell (R-Ky.) last year, which allowed the president to raise the debt ceiling unless Congress rejected the action by a two-thirds vote.
But McConnell’s proposal was good only through this year and was never meant to be permanent. Many Republicans have been angered by what they see as a White House attempt to give the president unlimited borrowing power.
“Look: The only way we ever cut spending around here is by using the debate over the debt limit to do it. Now the president wants to remove that spur to cut altogether. It gets in the way of his spending plans,” McConnell said on the Senate floor Thursday. “I assure you: It’s not going to happen.”
On Thursday, McConnell proposed an immediate vote on the issue, wagering that many Democrats would resist granting the president such powers. Instead, Democrats huddled and called McConnell’s bluff. Senate Majority Leader Harry M. Reid (D-Nev.) emerged to announce that they were prepared to proceed with an up-or-down vote on the idea. McConnell then essentially announced a filibuster of the very vote he had suggested, noting that nearly all votes of consequence in the Senate require a 60-vote threshold.
Some liberals say the only way to resolve the debt-ceiling deadlock would be to declare the limit unconstitutional, citing the 14th Amendment’s requirement that the validity of the government’s credit “shall not be questioned.”
Obama had previously resisted similar entreaties from allies, and the White House for the first time explicitly took that option off the table Thursday, adding further urgency for Obama to resolve the issue before the country reaches the brink of default.