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With One Crisis Over, Lawmakers Gird for a New Clash Lawmakers Gird for a New Clash, on the U.S. Debt Ceiling
(35 minutes later)
WASHINGTON — President Obama’s eyes narrowed late Tuesday as he looked into the cameras and warned Republicans that he had no intention of ever getting pulled into another negotiation over raising the nation’s borrowing limit. WASHINGTON — 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.
“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, pausing to repeat himself. “We can’t not pay bills that we’ve already incurred.” 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.
But it is not clear exactly how Mr. Obama can avoid engaging in just such a tug of war. “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.
In the wake of the president’s victory on taxes over the New Year’s holiday, Republicans in Congress are betting that by refusing to unconditionally raise the $16.4 trillion debt ceiling, they can force Mr. Obama to the bargaining table on spending cuts and issues like reform of Medicare and Social Security. 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.
That would inevitably reprise the bitter clash over the debt ceiling in the summer of 2011, when the government came close to shutting down before lawmakers and the president agreed to a $1.2 trillion package of spending cuts in exchange for Republican agreement to raise the debt ceiling by about the same amount. 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.
And that is exactly what Republicans want. “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.”
The party’s caucus in the House will discuss its debt ceiling strategy at its retreat in Williamsburg, Va., in a couple of weeks, according to a top Republican aide, who said it was determined to insist again on spending cuts that equal the increase in the amount the country can borrow. Joel Prakken, senior managing director of Macroeconomic Advisers, an economics forecasting firm, said bluntly, “This is kind of a mess.”
“The speaker told the president to his face that everything you want in life comes with a price. That doesn’t change here,” the Republican aide said. “I don’t think he has any choice.” 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.
That strategy could risk a new round of criticism aimed at Republicans from a public weary of brinkmanship. The 2011 fight ended with a last-minute deal but led to a downgrade in the rating of the nation’s debt and a slump in the economic recovery. Now, the president and Mr. Boehner are both 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 both Mr. Obama and the Democratic-controlled Senate.
But Brendan Buck, a spokesman for Speaker John A. Boehner, said Republicans had made it clear what they wanted in exchange for a willingness to allow borrowing to increase. 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.
“If they want to get the debt limit raised, they are going to have to engage and accept that reality,” Mr. Buck said. “The president knows that.” 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.
In fact, the White House has been on notice for months that Republicans view the debt ceiling as leverage in the next budget fight. Now, the question is what Mr. Obama and his advisers can do to sidestep that fight. And that is exactly what Republicans want — again.
One possibility is to turn to business executives for support. Many top chief executives view the possibility of a debt ceiling crisis as a significant impediment to the nation’s economy just as it is beginning to grow again. Those executives might try to pressure Republican lawmakers not to use the country’s credit as a negotiating tool. “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.”
Mr. Obama might also take to the road again, using the power of his office to try 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 default. 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.
The president and his aides have signaled that they will try to educate the public by explaining that the increase in the borrowing limit is necessary to cover debts that the government has already incurred. In his statement on Tuesday night, Mr. Obama warned about what would happen if the country did not meet its obligations. “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.”
“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. 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.
In the coming days and weeks, Mr. Obama is likely to try to focus negotiations on the other looming issue: how to avoid deep across-the-board cuts to the nation’s military and domestic programs. The deal passed on Tuesday postpones those cuts for two months, but Mr. Obama and lawmakers in both parties are eager to avoid them. “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.”
Instead, the president wants a debate over spending cuts and tax changes that would remove loopholes and deductions for wealthy Americans. 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.
That fight is coming. The question is whether the president can avoid conducting it in the middle of a nasty, drawn-out debate over the debt limit. “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 to try and 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.