Obama and Republicans clash over U.S. debt limit increase
Thursday, May 17, 2012
Obama, Republicans clash over U.S. debt limit
increase
By David Lawder and Jeff Mason, Reuters
May 17, 2012
WASHINGTON (Reuters) - If Republican and Democratic leaders want
to avoid a reprise of last year's nasty showdown over raising the
federal debt limit, they are not off to a good start.
After meeting with President Barack Obama and senior Democratic
lawmakers over lunch at the White House on Wednesday, top
Republicans came away thinking the Democratic president does not
want new spending cuts to accompany any legislation to increase the
debt limit.
Democrats disputed the accuracy of that impression, but such a
stance by Obama would put Democrats on a fiscal collision course
with Republican House of Representatives Speaker John Boehner, who,
according to aides, told the president that "I'm not going to allow
a debt ceiling increase without doing something serious about the
debt."
After the meeting, White House spokesman Jay Carney did not
specify whether Obama would refuse to consider spending cuts as
part of a plan to increase the debt limit.
But Carney said Obama made it clear to Boehner "that we're not
going to re-create the debt ceiling debacle of last August."
The lengthy stalemate between Congress and the White House over
raising the debt ceiling last summer brought the United States to
the brink of a historic default, and led Standard and Poor's to
downgrade the triple-A U.S. credit rating.
The episode did not push up interest rates, but economists say
the uncertainty it created contributed to a slowdown in economic
growth last year.
The U.S. Treasury is now expected to reach the $16.4 trillion
debt limit sometime between the November 6 election and early 2013,
an event that eventually would halt government borrowing, force
shutdowns of many operations and threaten the government's ability
to repay maturing debt.
"It is simply not acceptable to hold the American and global
economy hostage to one party's political ideology," Carney said, an
apparent reference to compromise-resistant Republicans in Congress
who will not accept any tax increases as part of a plan to trim the
government's debt
Carney added that Obama wanted a "balanced approach" to deficit
reduction - a phrase Democrats have used to refer to tax increases
on the wealthy alongside spending cuts.
DISAGREEMENT OVER OBAMA'S STANCE
Besides Obama and Boehner, Wednesday's meeting over
Italian-style sandwiches included House Minority Leader Nancy
Pelosi and Senate Majority Leader Harry Reid, both Democrats, and
Senate Minority Leader Mitch McConnell, a Republican.
The meeting took place a day after Boehner issued a demand that
any increase in federal borrowing authority be exceeded by spending
cuts.
A Boehner aide said the speaker asked Obama at the White House
on Wednesday whether he was proposing that Congress pass a debt
limit increase without spending cuts.
"The president said, 'Yes,'" the aide said.
That assertion about Obama's position was later disputed by
Pelosi and other Democrats.
The inability of Republicans and Democrats to agree even on what
Obama said during the meeting symbolized the distance between them
on the debt issue.
Some Democrats suspect that Republicans might be willing to feed
a debt crisis that increases instability in the economy - and
potentially damages Obama's chances of defeating Republican Mitt
Romney in November.
Republicans reject that scenario, but party leaders in Congress,
and Romney, who is on the campaign trail, now seem to be in harmony
with their anti-Obama message on the debt.
On Wednesday in St. Petersburg, Florida, Romney blasted Obama's
spending record while standing in front of a digital debt clock
that showed $15.685 trillion and counting.
"I find it incomprehensible that a president could come to
office and call his predecessor's record irresponsible and
unpatriotic, and then do almost nothing to fix it and instead every
year add more and more spending," Romney said.
After mainly attacking Obama and his Democrats on the sluggish
economy and high unemployment, Romney and other Republicans are
opening a new front on an issue where they feel they have the upper
hand - runaway Washington spending. Anxiety over U.S. debt swept
dozens of Tea Party fiscal conservatives into Congress in 2010.
"They believe that talking about fiscal problems - the debt and
the deficits - are good issues for them," said Ethan Siegal, who
tracks Washington politics for institutional investors. "It puts
Obama on the defensive, and it gins up the fiscal activist base"
within the Republican Party.
Republicans "need to have their base excited about the
election," said Siegal, who added that if the economy continued its
slow but steady improvement, its negative impact for Obama could
wane in coming months.
SEEKING MEANINGFUL DEBATE
Michael Pond, a fixed-income analyst with Barclays Capital in
New York, estimated that Congress would not have to act to raise
the debt limit until at least February, as the Treasury Department
could stave off the day of reckoning by some two months with
special cash management measures employed last year.
More moderate Republicans in Congress welcome an early debate
over the borrowing cap, but want a constructive dialogue.
"I think it's helpful as long as we have a strategy," said
Republican Representative Steven LaTourette, who has championed
bipartisan solutions to debt reduction.
"To just bring it up and dig our heels in the sand and say we're
going to have a repeat of last August, I don't think anybody came
out of that very well," the congressman said.
Democrats are ready to pounce on the specific cuts that
Republicans are proposing to reach their deficit-reduction goals -
mainly to the popular Medicare healthcare system for the elderly,
Medicaid healthcare for the poor, food stamps and other social
safety net programs.
Boehner has already ruled out tax hikes as part of any
debt-reduction deal, although he said comprehensive tax reform
efforts, possibly next year, could cause some Americans' tax bills
to rise as certain deductions and credits are eliminated.
An aide said Boehner had never included military cuts in his
formula for a debt hike/spending reduction package.
Analysts say that leaves few places to turn for cuts - mainly
the "discretionary" spending that already has been targeted, which
keeps federal agencies running and funds programs ranging from
education, medical research and transportation to the NASA space
agency.