Intensity, Insults Rise in Debt Debate 04/01 08:55
WASHINGTON (AP) -- Fights over increasing the nation's borrowing authority
have been contentious in Congress, yet follow a familiar pattern: Time and
again, lawmakers found a way to step back from the brink before markets began
to panic and the nation risked a dangerous default on its debt.
But this year's fight has a different feel, some lawmakers say.
A new Republican majority in the House is itching for a spending showdown,
and determined not to yield. They blame what they view as excessive federal
spending for higher food and gasoline prices and the growing national debt. Led
by Speaker Kevin McCarthy, they have ruled out passing a "clean" debt ceiling
increase even as the White House insists such legislation be passed without
conditions. It's an impasse that shows no signs of easing ahead of this
summer's deadline for action.
"Very worried. Very worried," was how Rep. Patrick McHenry, R-N.C., a close
McCarthy ally, described his outlook. "And frankly, I don't see how we get
there at this point. There's no process set up, there's no dialogue, there's no
The political conditions are comparable to 2011, when a new Republican
majority swept into power after a resounding election win and was determined to
confront a Democratic White House and extract major spending cuts in return for
a debt limit increase.
To resolve that stalemate, Congress passed and President Barack Obama signed
the Budget Control Act. The bill temporarily allowed borrowing to resume, set
new spending limits and created a bipartisan "supercommittee" to recommend at
least $1.2 trillion more in deficit reduction over 10 years. Republicans and
Democrats on the panel failed to compromise, however, triggering automatic
reductions in spending.
But some damage was done. Standard & Poor's Ratings Services downgraded U.S.
debt for the first time that year because it lacked confidence political
leaders would make the choices needed to avert a long-term fiscal crisis.
In 2013, Obama took a different tack. He made clear early on there would be
no negotiations on must-pass legislation to prevent a U.S. default, and he
A partial government shutdown, which began Oct. 1, swiftly coincided with
the prospects of a default. On Oct. 16, Congress passed legislation to end the
twin threats and GOP lawmakers who demanded to roll back Obama's signature
health care law got nothing for their efforts. "We fought the good fight. We
just didn't win," conceded then-House Speaker John Boehner.
Republicans say they are determined that Biden, who was Obama's vice
president during both of those debt ceiling battles, will have to follow the
path set in 2011 -- not the one set in 2013.
"President Biden is not President Obama, right?" said Rep. Scott Perry,
R-Pa., the leader of the hard-right House Freedom Caucus. "His poll numbers are
in the tank and they're going to keep going down."
The result, Perry said, is that Biden doesn't have the political standing to
ignore House Republicans.
"Look, there's gonna be shrapnel all around, right. Right?" Perry said.
"Everybody might take some wounds from it, but he's not walking out of this
After a tumultuous start to the new Congress in which Republicans struggled
to elect a speaker, they are taking great pains to show unity. Moderates and
conservatives in the House are adamant: Biden must engage.
"Any damage in Treasury markets and the bond market, to the economy, will
fall at the feet of the president of the United States because he's the one
that started this entire saga saying he wanted no negotiations," said Rep.
Byron Donalds, R-Fla.
"He's got to meet us partway," added Rep. Don Bacon, R-Neb.
Democratic Rep. Gerry Connolly of Virginia said what concerns him most is
that some Republicans believe the damage from a federal default is manageable,
rather than to be avoided at all costs.
"Some of these people are substituting belief for empirical evidence and
don't accept the warnings of economists, Wall Street, Janet Yellen," Connolly
Breaching the debt ceiling is different than a federal government shutdown.
The government can continue to operate once the Treasury has exhausted its
cash-on-hand. But outgoing payments would be limited to incoming revenue. Not
all payments could be made on time and in full. Many fear such an event would
shake the foundations of the global financial system.
Some lawmakers don't believe the consequences would be that devastating.
Rep. Bob Good, R-Va., said breaching the debt limit without an agreement to
increase it would force "prioritization of our spending."
"I'm not afraid of that, quite frankly," Good said.
Treasury Secretary Janet Yellen has said the government may be unable to pay
all its bills as soon as June. Mark Zandi, chief economist at Moody's
Analytics, told a House panel this week the so-called X Day is likely to occur
in mid-August. He said market pressures will likely build after Congress
returns from its July 4th recess.
"As we can see from recent events given the banking crisis, the system is
very fragile at this point in time," Zandi said. "Adding the debt limit as an
issue for investors would be particularly inopportune."
He said there would be immediate and long-term consequences from a default.
"I think under any scenario, we would go into recession, it would be severe,
financial markets would be upended," Zandi said.
In the Senate, Democratic Sen. Joe Manchin of West Virginia is encouraging
negotiations. "I think Kevin McCarthy has been most reasonable," he said.
GOP leadership in the Senate has also voiced support for McCarthy's efforts.
But some Senate Republicans say spending fights should be relegated to the
annual spending bills that Congress passes to fund government agencies. An
increase in the debt limit doesn't authorize new federal spending -- it only
allows borrowing to pay for what Congress has already approved.
"Look, if we have disagreements on spending, and if we have to close
government to resolve things, so be it, but threatening a collapse of the U.S.
and world economy without raising the debt ceiling is, in my opinion, a weapon
that is too severe," said Sen. Mitt Romney, R-Utah.
There have been roughly 80 deals to raise or suspend the borrowing cap since
the 1960s. Romney noted that the debt ceiling was extended, with the help of
Democrats, multiple times during Donald Trump's presidency.
"Of course, last time you had President Trump as the individual pushing to
raise the debt ceiling, but somehow when we have a Democratic president, we
find religion," Romney said.
The focus on the debt limit, now at about $31.4 trillion, intensified this
week with McCarthy sending a letter to Biden warning that his position of not
negotiating "could prevent America from meeting its obligations and hold dire
ramifications for the entire nation."
In a formal response, Biden signaled that he would not be willing to meet
directly with the speaker until House Republicans released their own budget
plan, which he asked McCarthy to do before lawmakers left Washington on
Thursday for the Easter recess.
"As I have repeatedly said, that conversation must be separate from prompt
action on the Congress' basic obligation to pay the Nation's bills and avoid
economic catastrophe," Biden wrote.
The letters did not appear to generate any progress or good will.
Republicans left town without proposing a budget. And McCarthy accused Biden on
Thursday of making the decision to put the economy in jeopardy, while seemingly
making a crack about the president's age.
"I don't know what more I can do and how easy. I would bring the lunch to
the White House. I would make it soft food if that's what he wants," McCarthy
said, prompting laughter from other Republicans in the room.