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Politics 2014: Deficit, debt ceiling debate not for faint of heart

By NICOLE DEBEVEC, United Press International   |   Sept. 1, 2013 at 5:01 AM
The clock counting down to some potentially nasty fiscal realities has been ticking for a while but will sound a little louder and more urgent once Congress returns to Washington.

Two critical deadlines loom at the end of September: the end of the current fiscal year and the expiration of the continuing resolution that's been keeping government running the last six months.

Further out -- but only slightly -- is the need to raise the nation's debt ceiling or the United States won't be able to pay bills it already has incurred. Officials say the ceiling will be breached by mid-October.

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As if that weren't enough, sequestration budget cuts in fiscal 2014 are coming down the pike. Democrats want to nix the automatic spending cuts while Republicans want to keep them in place -- although not across-the-board when defense and security are discussed.

Lest anyone forget, the last time a perfect storm of budget-related deadlines crashed together was during the summer of 2011. What happened? The U.S. credit rating was downgraded, stock prices fell through the floor, pain was spread throughout the economy -- and both parties spent lots of energy painting the other party as the bad guy.

If history is any guide, Congress and President Obama will lurch toward some sort of agreement with little room to spare. Or maybe a few days late. Or maybe not.

House Speaker John Boehner, R-Ohio, has said raising the debt ceiling will require a tit-for-tat (or more) cuts or reforms in spending.

Treasury Secretary Jack Lew challenged Congress to raise the debt limit, telling CNBC negotiating on raising the ceiling is a non-starter for Obama.

"What we need in our economy is some certainty. We don't need another self-inflicted wound," Lew said. "Congress should come back and they should act. ...

"We don't need another crisis at the last minute. ...

"Congress has already authorized funding, committed us to make expenditures," the treasury secretary told CNBC. "We're now in a place where the only question is, will we pay the bills that the United States has incurred?"

The government has been nudging its $16.7 trillion debt ceiling since May.

Still, Boehner says he's prepared for a "whale of a fight" with Obama over raising the federal debt ceiling, The New York Times said.

At an Idaho fund-raiser for GOP ally Rep. Mike Simpson, Boehner said he anticipated using the need to raise the debt ceiling to gain political leverage and demand "cuts and reforms that are greater than the increase in the debt limit."

The Obama administration repeatedly said it won't let congressional Republicans use the debt ceiling as leverage to gain concessions from the White House, the Times said. The Federal Reserve has warned that such brinkmanship could hamper the economic recovery.

"Let me reiterate what our position is," White House spokesman Jay Carney said last week. "And it is unequivocal: We will not negotiate with Republicans in Congress over Congress' responsibility to pay the bills that Congress has racked up. Period."

The president has tried to reach across the aisle on budget issues, Lew said in the CNBC interview, stressing the sequester must be replaced with balanced policies to reduce the deficit.

"With substantial headwinds from federal policy," Lew said the core economy is growing "in the 2 percent range."

"As we get to the end of the year, we think that without the headwinds of additional federal cuts, the economy should pick up a notch again," he said.

Lew made it clear the White House was willing to make "tough" decisions on entitlement reform but also wants tax increases in the mix.

"We've pressed very hard for the kinds of agreements that would do both spending reform, entitlement reform and tax reform," he told CNBC.

During an appearance in California, Lew noted the difference between the debt ceiling and any new spending.

"It is important to note that the debt limit has nothing to do with new spending," he said. "It has to do with spending that Congress has already approved and bills that have already been incurred. Failing to raise the debt limit would not make these bills go away. It would, though, have disastrous effects for our nation."

Boehner recently took one budget fight off the table by announcing he plans to avoid a government shutdown at September's end and has urged lawmakers to pass a short-term bill that would retain sharp automatic spending cuts so the federal government can operate for two months past Sept. 30.

Federal revenues have increased as the nation recovers from the recession and the deficit has been reduced in recent months, prompting speculation in Washington it might be possible to lift the sequester that opponents say resulted in harmful cuts to defense and non-defense programs.

"Sequestration is going to remain in effect until the president agrees to cuts and reforms that will allow us to remove it," Boehner, R-Ohio, told reporters recently on Capitol Hill. "The president insisted on the sequester none of us wanted. None of us like it. There are smarter ways to cut spending."

Boehner's comment came a day after House Appropriations Committee Chairman Harold Rogers, R-Ky., said in a statement "sequestration -- and its unrealistic and ill-conceived discretionary cuts -- must be brought to an end," Roll Call reported.

As part their budget-reduction strategy, Republicans have been trying to repeal and defund the president's healthcare law. But they'll run into a brick wall because the White House won't accept any delay or defunding of the Affordable Care Act, colloquially known as Obamacare, Lew said.

For the squeamish among Republicans, the conservative Heritage Foundation, led by former Sen. Jim DeMint, R-S.C., says it'll be watching and taking names when Obamacare funding measures come up for votes. (The online insurance exchange program is supposed to be up and running in October.)

Last summer, lawmakers panicked as the fiscal cliff approached, aides told the National Journal. Now, they know what to expect.

"People aren't really scared, certainly like they were leading up to the fiscal cliff," one aide said.

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