Debt ceiling redux: Lawmakers push to link fiscal cliff deal to the national debt

The debt ceiling is back.

Just 16 months ago, a fight over the national borrowing limit paralyzed Washington, damaged the country’s credit rating and nearly pitched the United States into default.

On Thursday, the White House and Democrats in Congress signaled that they wanted to take up that fight up again — and do it now.

They warned Republicans that any solution to this year’s “fiscal cliff” standoff must also address the nation’s need to again raise the debt ceiling to avoid default.

“Whatever arrangement we come up with, there will be an agreement on the debt ceiling,” Senate Majority Leader Harry M. Reid (D-Nev.) told reporters Thursday, saying he was echoing a statement from President Obama. “Or there will be no agreement.”

In a meeting Thursday with House Speaker John A. Boehner, Republican aides said Treasury Secretary Timothy F. Geithner proposed that Congress give Obama greater control over raising the debt ceiling.

He asked that Congress agree that the president be allowed to propose a debt-ceiling increase, which Congress can vote to dis­approve. But Obama could then force an increase in the debt ceiling by vetoing the resolution of disapproval.

Republicans balked at that suggestion. House Speaker John A. Boehner (Ohio), the most powerful Republican in Congress, has appeared open to congressional action to raise the debt ceiling, but he has laid out some tough terms in exchange for doing so, either now or after Jan 1.

For each dollar the limit goes up, Boehner has demanded that the government cut a dollar in spending.

For the leadership of both parties, there could be advantages to dealing with this issue now, as part of a larger agreement to avoid the “cliff” of large tax hikes and spending cuts scheduled to take effect Jan. 1.

For Democrats, it would mean preventing another, separate debt-ceiling showdown next year. Such a scenario could damage the economy and also highlight the fast-rising debt accumulating on Obama’s watch.

For Republican leaders, it would avoid another crisis like the last one — in which some conservative members pondered allowing the nation to default as a kind of tough-love lesson.

Either way, neither party can put off this fight much longer. The country is already running out of room to borrow.

After the battle in the summer of 2011, Congress raised the national debt limit to $16.394 trillion. This week, a study by the nonprofit Bipartisan Policy Center concluded that, given the current pace of borrowing, the Treasury Department will hit that limit sometime in late December.

Treasury officials could give themselves more time, the center concluded, with a series of extraordinary legal and financial maneuvers. The Treasury Department has said those steps would push the limit to “early in 2013.” The Bipartisan Policy Center narrowed it down a little more: The money would last until sometime in February.

Then comes “X Date” — the time when the United States simply runs out of money to pay its bills. That could be just weeks after a new Congress is sworn in and just days after Obama takes his second oath of office.

“The reality up there is, you’re not going to have the time” to work out a separate debt-ceiling deal next year, said Steve Bell, a longtime Republican staffer on the Hill and an author of the Bipartisan Policy Center’s study.

Because of that, Bell said, the deal should be done in the last weeks of the current Congress. “You cannot separate the question of extending the debt ceiling from what will occur in the lame-duck [session].”

But if Thursday signaled new willingness in Congress to address the debt ceiling now, it did not reveal any consensus about what to do with it.

The proposal Geithner made Thursday would have the effect of giving the president more power over debt ceiling increases — essentially requiring two-thirds of Congress to disapprove of future increases. The national debt is climbing by more than $1 trillion a year, making increases potentially necessary again.

In a way, Thursday’s news served to put the broader fiscal cliff talks in perspective, like standing a Clydesdale next to an elephant.

The debt ceiling, an issue that dominated Washington for weeks last year, is now just one part of a much broader debate about how to stop tax hikes and spending cuts scheduled for next year.

Among Republicans, some thought it was smart to use this issue in the fiscal cliff negotiations. If Republicans could threaten to block a debt-ceiling increase, that would give them an additional bargaining chip.

“Whatever forces us to cut spending, we ought to do it,” said Rep. Jeff Flake (R-Ariz.), who will be a senator in the next Congress. “If that’s a separate conversation about the debt ceiling, that’s what we ought to do.

But others said they felt the issue should be put off until next year, thinking that they would have more leverage in a fight that’s about the debt ceiling alone.

“They should be separated,” said Rep. Tim Huelskamp (R-Kan.). “Now’s the time to focus on the issues related to the tax increases and spending cuts.” Huelskamp said he had made that argument in a meeting of the House GOP this week and felt it had strong support.

David A. Fahrenthold covers Congress for the Washington Post. He has been at the Post since 2000, and previously covered (in order) the D.C. police, New England, and the environment.
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