Congress prepares for fight over U.S. debt limit

Congress prepares for fight over U.S. debt limit

With the resolution of the year-end fiscal crisis just hours old, the next political confrontation is already taking shape as this city braces for a fight in February over raising the nation’s borrowing limit. But it is a debate President Obama says he will have nothing more to do with.

Even as Republicans vow to leverage a needed increase in the federal debt limit to make headway on their demands for deep spending cuts, Mr. Obama — who reluctantly negotiated a deal like that 18 months ago — says he has no intention of ever getting pulled into another round of charged talks on the issue with Republicans on Capitol Hill.

“I will not have another debate with this Congress over whether or not they should pay the bills that they’ve already racked up through the laws that they passed,” the president said Tuesday night after he successfully pushed Republicans to allow tax increases on wealthy Americans. On Wednesday, he signed the legislation.

The president’s position is sure to appeal to his liberal allies, who fear another round of compromises by Mr. Obama. But it once again sets the stage for a nail-biting standoff that economists warn could lead to a damaging financial default and doubt from investors about the ability of the country to pay its obligations.

Moody’s, the rating agency, warned on Wednesday that the looming political battles over the nation’s debt could lower the group’s rating of American debt.

“We’re in for another round of brinkmanship and uncertainty,” said Mark Zandi, the chief economist at Moody’s Analytics, who predicted weeks of “angst, discussion and hand-wringing” in Washington. “I don’t think the economy can really find its footing and jump to a higher level of growth until we get to the other side of this.”

Joel Prakken, senior managing director of Macroeconomic Advisers, an economics forecasting firm, said bluntly, “This is kind of a mess.”

The financial imperative for an increase in the debt limit comes at a time of increasingly sour relations between the president and his Republican adversaries in the House. To secure a deal to avert automatic tax increases and spending cuts on Jan. 1, Mr. Obama was forced into last-minute talks with Senator Mitch McConnell of Kentucky, the Republican leader, after weeks of negotiations with Speaker John A. Boehner in the House collapsed amid acrimony and internal Republican dissension.

Now, the president and Mr. Boehner are signaling a fresh round of take-it-or-leave it stands that are in sharp opposition: The president says increasing the borrowing limit is nonnegotiable, while Republicans say the House is all but certain to pass a bill that raises the debt limit only in exchange for significant cuts — a challenge to Mr. Obama and the Democratic-controlled Senate.

Smarting from the president’s victory on taxes over the New Year’s holiday, Republicans in Congress are betting that their refusal to raise the $16.4 trillion debt ceiling will force Mr. Obama to the bargaining table on spending cuts and issues like changes in Medicare and Social Security.

But doing so would inevitably reprise the bitter debate over the debt ceiling that took place in the summer of 2011, when the government came close to defaulting on its debt before lawmakers and the president agreed to a 10-year package of spending cuts in exchange for Republican agreement to raise the debt ceiling by about the same amount.

And that is exactly what Republicans want — again.

“If they want to get the debt limit raised, they are going to have to engage and accept that reality,” said Brendan Buck, a spokesman for Mr. Boehner. “The president knows that.”

Senator Patrick J. Toomey, Republican of Pennsylvania, said flatly that his party should risk the possibility of default — including interruptions in federal benefit checks and paychecks for government workers — if it was the only way to compel the president to support deep spending cuts that will reduce the deficit.

“That’s disruptive, but it’s a hell of a lot better than the path that we’re on,” Mr. Toomey said Wednesday on MSNBC. “We absolutely have to have this fight over the debt limit.”

The Republican Party’s caucus in the House will discuss a debt ceiling strategy at a private retreat in Williamsburg, Va., this month, according to a top Republican aide, who said they were determined to insist again on spending cuts that equal the amount of increase in how much the country can borrow.

“The speaker told the president to his face that everything you want in life comes with a price,” the aide said. “That doesn’t change here. I don’t think he has any choice.”

White House officials say Mr. Obama is equally determined to avoid letting the debt ceiling become a regular Republican tool for extracting concessions on spending on programs popular with Democratic constituents.

“It means that he won’t negotiate on it,” a senior administration official said Wednesday about the president’s comments. ”He’s not entertaining offers about it. We’re not having meetings about it.”

The official, who asked for anonymity to discuss legislative strategy, said the debt limit “was never used as a policy leverage tool before.”

“This is them paying the bills for the spending that they racked up,” the official said. “They need to do that.”

Some people in both parties questioned why Mr. Obama would so emphatically vow not to negotiate over the debt limit, a promise he may ultimately be forced to break if necessary to avoid economic shock waves.

“It’s bizarre,” said one veteran Democratic senator who would not be named, citing the proven willingness of Republicans to force a fiscal crisis unless the president makes a deal for additional spending cuts.

Mr. Obama resolved immediately after the 2011 debt crisis, privately and publicly, that he would not be drawn again into negotiations over the borrowing limit. He has said that presidents and Congresses have a fundamental, shared responsibility to ensure that the government pays bills that it owes to its citizens and creditors.

In saying he will refuse to bargain over the debt limit, Mr. Obama is counting on help from the business community, given its traditional ties to Republicans. Recently, for example, the head of the Business Roundtable, John Engler, a Republican and former governor of Michigan, called for extending the debt limit for five years.

“You don’t put the full faith and credit of the United States’ finances at risk,” said David M. Cote, chairman of Honeywell and a Republican member of the 2010 Simpson-Bowles fiscal commission. “The whole idea of using debt ceiling that way or saying ‘I’ll do this horrible thing to all of us unless you give in’ just doesn’t make any sense for anybody. It makes me very nervous. It’s not a smart way to run the country.”

Mr. Obama might also take to the road again, using the power of his office in an effort to convince the public that another fight over the debt ceiling risks another economic crisis. Public polls after the last debt ceiling fight suggested that more people blamed Republicans for the threat of a shutdown.

“If Congress refuses to give the United States government the ability to pay these bills on time, the consequences for the entire global economy would be catastrophic — far worse than the impact of a fiscal cliff,” Mr. Obama said Tuesday.

Source: The New York Times