CQ TODAY ONLINE NEWS
June 20, 2011 – 9:24 p.m.
Debt Limit Negotiations Enter Critical Week
By Joseph J. Schatz, CQ Staff
Negotiators are approaching a crucial juncture this week that could determine how much deficit reduction is politically viable this summer — and how Congress will deal with the government’s imminent borrowing needs.
Vice President
With the House out of town next week and the Senate gone the week of July Fourth, lawmakers may be forced to start making decisions about what can or cannot be included.
“If we haven’t made enough progress by the end of this week, we’re really going to have to reassess the situation,” Minority Whip
Kyl, of Arizona, said it could take four weeks for Congress to process any deal. “It’s going to take some time even if an agreement is reached, first of all to get it put together and then to give time for members of Congress and the public to adequately digest it and debate it and then vote on it,” he said. “It may not all pass the first time around and so on.”
Republicans are demanding that any increase in the $14.3 trillion debt limit be paired with equally large, or larger, spending cuts — a demand the White House has not publicly accepted.
Senate Minority Leader
But House GOP leaders have said that they want a long-term debt deal, not a short-term fix.
Satisfying the government’s borrowing needs through 2012, which is the goal many top lawmakers would like to meet, would require at least a $2.4 trillion increase to the debt limit.
Rep.
Taxes and Entitlements
Biden said last week that after identifying cuts across the federal budget, negotiators now face the most divisive issues: taxes and entitlement spending. Discussing those items this week could force the group to decide whether a grand deal is possible, or if congressional leaders need to move to a shorter-term solution while there is still time.
But the outcome of the talks — and the direction they will lead in the coming weeks — remains very fluid, according to sources close to the discussions.
Debt Limit Negotiations Enter Critical Week
Biden has kept the talks on track by steering the conversations away from the points of most controversy. It remained unclear Monday whether the group would try to tackle Medicare and taxes this week, or continue to work on other areas, such as discretionary programs and mandatory spending on programs other than health care.
Focusing on the less controversial items might get each of the principals more invested in the broader package of cuts.
Plus, any decision to change Medicare or tax expenditures would be beyond the scope of the Biden group. Ultimately, those decisions will fall to Obama, House Speaker
If they revert to a shorter-term debt limit increase, Republicans are expected to demand the same dollar-for-dollar spending- cut formula as a way of keeping the pressure on the White House. The GOP used that strategy effectively during the fight over fiscal 2011 discretionary spending earlier this year, when House Republicans assented to a series of short-term measures to keep the government functioning, but only with accompanying, prorated spending cuts.
But if Congress is facing a possible default, the White House could decide to pressure Republicans to help pass a last-minute deal that falls short of conservatives’ demands.
Biden said last week that negotiators have agreed to a variety of spending cuts, which probably means reductions in farm subsidies, federal worker pensions and other domestic programs. Whether leaders would draw from that pool of cuts to meet demands for a short-term increase, or keep them intact in hopes of a broader agreement, remains to be seen.
Kyl said curbs on targeted tax breaks for particular industries — such as those for the ethanol industry that the Senate last week went on record as opposing — could be a modest part of a deficit reduction package.
“I’ve always believed that for good tax policy reasons, we ought to get rid of some of those things,” Kyl said.
But he said that costlier tax credits, such as the mortgage deduction, should be considered at a later date as part of a broad rewrite of the tax code that would lower overall rates.
“We have a big difference of opinion as to which tax expenditures are good or bad,” Kyl said.
Brinkmanship and Blame
McConnell’s comments appeared to minimize the prospect of brinkmanship on the debt limit, given the Treasury Department’s warnings of a financial calamity if a default occurs.
Still, Democrats and Republicans are likely to have different ideas on the duration of any short-term increase in the government’s borrowing authority. Debt limit battles in the 1990s resulted in several short-term raises, and there is no consensus on whether a series of short-term deals would cause interest rates to rise.
Debt Limit Negotiations Enter Critical Week
Leaders of both parties are likely to think carefully about who would shoulder the blame for a debt crisis.
In a survey by the Pew Research Center for the People and the Press and The Washington Post, 42 percent of respondents said that Republicans would bear the most responsibility if Congress does not reach a debt limit deal; 33 percent said that it would be the White House’s fault.
Brian Friel and Paul M. Krawzak contributed to this story.