CQ TODAY ONLINE NEWS – BUDGET
July 24, 2011 – 6:44 p.m.
Pressure Builds on Leaders, Obama With Eight Days Until Debt Deadline
By Joseph J. Schatz, CQ Staff
Republican and Democratic congressional leaders appear headed in separate directions on debt limit and deficit reduction legislation at the start of a critical week in a partisan standoff that has left financial markets shaky.
Unable to reach any bipartisan agreement among themselves or with the White House over the weekend, party leaders were working separately toward measures they might be able to move in their chambers this week and provide the basis for an eventual compromise.
House Speaker
Democrats were also looking for alternatives Sunday evening. Senate Majority Leader
Negotiations were likely to continue Monday with a new sense of urgency. Any floor action would be unlikely before midweek. The Treasury has told lawmakers they have until Aug. 2 — eight more days — to take action to head off the first government default in the nation’s history.
Leaders in both parties insist they want to avoid a default scenario at all costs, given the likelihood of an economic calamity — and the risk that one party might shoulder the political blame. Top aides and lawmakers have worked steadily over the past few weeks, looking for a legislative option that could pass muster with House conservatives and liberal Democrats.
Talks appear to be zeroing in on the politically fraught issue of how big a debt ceiling issue should be — and whether it should be sufficiently large to allow government borrowing to continue just into next year or through the 2012 election.
While Obama has ruled out the prospect of a short-term debt limit increase, House GOP leaders are saying that might be all they can give him.
Democratic leaders have backed Obama’s refusal to entertain a short-term limit increase, arguing that any deal needs to cover the nation’s borrowing needs through the coming election.
Beyond the question of who blinks first, investors and financial markets have a voice in the debate. The closer Congress comes to Aug. 2 without a final deal, there is a possibility that investors could shun American bonds and securities, which would drive up interest rates and deal another blow to the still-shaky recovery.
Several Republicans, including Senate Minority Whip
Midweek Vote?
Boehner has told his caucus the House must vote on a deal by midweek to give the Senate time to overcome procedural obstacles. That means legislation would have to be filed Monday. But a precise schedule and timing issues remain unclear.
Pressure Builds on Leaders, Obama With Eight Days Until Debt Deadline
In the meantime, Boehner talked with GOP lawmakers on conference calls throughout the weekend and began pushing forward with a plan to raise the debt limit in two stages. He said he might try to do it without Democratic support — a tricky proposition in his conference of restive conservatives.
Under his tentative plan, the debt limit would be raised in conjunction with a package of spending cuts. At the same time, Congress would create a bicameral deficit committee that would recommend budget cuts, which would then get a vote in the House and Senate. It was uncertain how much the debt limit would be boosted under the plan.
“There is going to be a two-stage process. It’s not physically possible to do all of this in one step,” Boehner said.
The first debt limit increase, as well as accompanying spending cuts, seems likely to rest on discretionary spending caps for fiscal 2012 and 2013, which could yield $1 trillion or more in savings over the next decade. And over the course of the last two months, leaders have also closed in on more than $200 billion in non-health mandatory budget savings.
Seizing on the idea, Boehner appears to want to make the second installment of increased borrowing authority contingent on Congress clearing the committee’s recommendations. The Speaker is pushing for $3 trillion to $5 trillion in overall spending cuts to be attached to a debt ceiling increase.
Reid wants nothing to do with that approach. The Senate leader has been under pressure from all sides. Last week, he appeared under pressure from Obama to accept entitlement cuts as a price for a bid deficit deal. Then he watched Boehner walk away from those talks.
Over the weekend, Reid started applying his own pressure, making it clear that while he is willing to set up two rounds of spending cuts, he wants to increase the debt limit through 2012 all at once — an increase of $2.5 trillion with no accompanying cutbacks in entitlement programs. Democrats do not want to make any installment of borrowing authority contingent on spending cuts.
The biggest question, however, may rest on how exactly Boehner tries to structure the second installment of debt limit authority and spending cuts — and whether Obama considers it “short-term” and thus a possible reason to veto the legislation.
Broad Deal on Life Support
After the Speaker walked away from far-reaching deficit talks with the White House on July 22, Obama sought to box in House Republicans, blasting them for being unwilling to compromise, and saying he would not accept their backup plan — a short-term extension of the debt ceiling, short of 2013.
But after a White House meeting between leaders and Obama on July 23 failed to generate any progress, Boehner sought to take back control of the issue.
Boehner suggested Sunday that he might come back to the negotiating table for a “grand bargain” if Obama would agree to an overhaul of the tax code that raises $800 billion. That amount is less than the $1.2 trillion Obama wants, and even Boehner’s underlying offer for new revenues could be a tough sell in his own conference.
“It may be pretty hard to put Humpty-Dumpty back together again . . . .[but] my offer is still out there,” the Speaker said on Fox News Sunday. The $800 billion would result from “a growing economy, without raising taxes,” he said — an attempt to show that he was keeping faith with Republican insistence on no tax increases.
Pressure Builds on Leaders, Obama With Eight Days Until Debt Deadline
But making those kinds of nuanced policy arguments could be difficult, with partisan tensions running high, and many House conservatives deeply wary of any deal-making with the Obama administration.