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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 
discussion."

   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 
never wavered.

   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 
thing unscathed."

   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 
said.

   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.

 
 
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