John Boehner's New Headache
By Caitlin Huey-Burns
Catastrophic. Brutal. Dangerous. Terrifying.
That's how lawmakers, the administration and market analysts have described the prospect of default if Congress fails to raise the borrowing limit on the nation's $16.7 trillion debt by the Treasury Department's Oct. 17 deadline.
But not all members of Congress see it this way.
Variations of those terms had been used to describe the impact of sequester cuts and a government shutdown, both of which have already gone into effect this year, and some lawmakers say the administration may be exaggerating the consequences of a breached deadline.
But unlike the shutdown, a default would be unprecedented. And when members of Congress returned to the Capitol on Monday after nearly a week of partial government shutdown, the two sides seemed further apart on finding a resolution to what looms as a disaster double-header in mid-October.
House Speaker John Boehner said Sunday that the country is headed down the default path unless President Obama and Democrats agree to curb spending that is driving up the debt. 'The votes are not in the House to pass a 'clean' debt limit,' he told ABC News, referring to an agreement that would require no Democratic concessions. 'And the president is risking default by not having a conversation with us.'
The problem for Boehner -- and, therefore, the president -- is that a number of GOP lawmakers don't believe the country will in fact default if the debt ceiling is not lifted; as a result, they insist they won't likely be spooked into raising it.
'We need to go back and redefine 'default,' ' said Rep. Steve King, an Iowa Republican. 'Default would be if you couldn't pay the interest and couldn't manage the principle on our national debt. And that's not going to happen. The resources are there. The cash flow is easily there to pay the interest on our debt.'
He asserted also that the Oct. 17 deadline is 'a very flexible date.' King (pictured) is a well-known thorn in Boehner's side, and has drawn headlines for his controversial remarks. But the sentiments he's expressing this time are also shared by conservative lawmakers who have worked across the aisle in the past. 'I would dispel the rumor that is going around that you hear on every newscast that if we don't raise the debt ceiling we will default on our debt,' Oklahoma Sen. Tom Coburn told MSNBC on Monday. 'We won't.'
Technically, there is some truth to that. When determining the Oct. 17 deadline, Treasury Secretary Jack Lew said the government would have $30 billion in cash on that date, but it will not be able to issue new debt beyond that point.
'In theory, I think that's true, but logistically, practically and politically it would be a very complicated thing to pull off,' says Nancy Vanden Houten, a senior analyst at Stone & McCarthy Research Associates (an investment information firm). 'And that doesn't mean there won't be a market reaction.'
Vanden Houten and other economists predict that money could last until the end of the month - but they place strong emphasis on 'could.'
Lawmakers who deny the default risk say the Treasury will have enough money to pay the interest the U.S. owes. 'I'm not as concerned as the president is on the debt ceiling because the only people buying our bonds right now are the Federal Reserve. So, it's like scaring ourselves,' said Sen. Richard Burr, noting that the government could arrange to make debt payments ahead of other expenditures. The North Carolina lawmaker was a vocal critic of colleague Ted Cruz' strategy to tie defunding Obamacare to a budget bill that would keep the government running. But like many of his fellow Republicans, Burr said he would not support a 'clean' increase in the debt ceiling because given 'the limited number of vehicles Republicans have in the Senate, we ought to take the opportunity to debate and amend as much as we can.'
The House previously passed measures to prioritize payments in the event of a breached deadline, but it's not clear that following through is technically and legally doable, given that the government issues millions of different payments. The administration, for its part, has dismissed that option. 'There is no option that prevents us from being in default if we don't pay our bills,' Lew told CNN on Sunday during a round of television interviews. Several GOP lawmakers described Lew as a partisan and expressed skepticism about taking him at his word.
What is clear is that the country has never breached the limit before, whether lawmakers label doing so as default or not.
'There is no option that prevents us from being in default if we don't pay our bills,' Lew told CNN on Sunday during a round of television interviews.
The fiscal uncertainty generated by this predicament has rendered most lawmakers unwilling to even test that boundary. Just the threat of default in 2011 was enough for the country's top credit rating agencies to downgrade the United States' AAA status to AA+, and devalued stocks by trillions of dollars.
But in that case, lawmakers reached a last-minute deal. This time, Congress has already gone over one cliff by shutting the government down, and the prospects of going over another seem at least thinkable in the current impasse. Those prospects are especially complicated by the subset of lawmakers who don't see any urgency to raising the limit -- or the need to do so at all.
The stakes this time also appear to be greater than in the past: Failure to lift the debt limit could inflict more harm to the economy than the collapse of Lehman Brothers five years ago, some economists from both sides of the aisle predict, citing the event that kicked off the recession. The comparison was outlined in a Bloomberg story circulated by Boehner's office.
The speaker has said he does not want to go into default and has warned his conference of the devastating impact it could have. He made a similar statement about the shutdown, but was unable to avoid it. But Boehner preferred tying a fight about the country's spending problem to the debt ceiling issue to tying a fight about Obamacare to the government funding measure.
Now he has to manage both, and is working with such lawmakers as Budget Committee Chairman Paul Ryan to piece together a bargain of sorts that deals with entitlements, the sequester, and other policy trades. One GOP lawmaker with knowledge of the talks said chained CPI (adjusting the inflation computation for Social Security payments) and means testing for Medicare have been discussed as possible elements. But the lawmaker also acknowledged that the conference's far-right members will still want a Democratic concession on Obamacare, and suggested repealing the medical device tax as a possible bone to toss that group's way. (Some conservative members, however, still insist on a one-year delay of the law.)
The Republican, who spoke last week to a small group of reporters on the condition of anonymity, also acknowledged that some members don't believe in raising the debt ceiling under any circumstances.
And there is a major disagreement between the two parties about when to arrive at any 'grand bargain' negotiating table. Democrats want to pass measures to re-open the government and lift the nation's borrowing limit before entering such talks. Republicans have passed several small-bore bills to fund certain parts of the government while holding the full funding bill and the debt ceiling deadline as bait to force Democrats to negotiate. They point to the fact that as a senator, Obama voted against raising the debt ceiling. And as president, he agreed to a brokered deal around previous deadlines.
On Monday, the two sides continued to point fingers over who would be responsible for a default -- just 10 days from the deadline. Senate Majority Leader Harry Reid called for a clean debt ceiling increase, and is reportedly thinking about passing a bill out of his chamber to start the process. The White House said Monday it could support even a temporary increase, as long as it carried no conditions. But even some of Reid's own members, such as Joe Manchin of West Virginia, have voted against clean debt hikes in the past. It could be difficult for such Democrats to support a measure they believe is doomed. Even with the votes of all Democrats, Reid would still need six GOP members' backing to overcome a procedural hurdle on the bill. Sen. Lindsey Graham told reporters Monday he could support a short-term increase with no strings attached if it led to a larger deal that addressed entitlements and spending.
Boehner and Republicans will continue to push for attachments to any debt-ceiling bill. 'A 'clean' debt limit increase can't pass the Senate, let alone the House,' said Boehner spokesman Michael Steel. 'It's time for some Washington Democrat to step up, act like an adult, and start talking about how we reopen the government, provide fairness for the American people under Obamacare, and deal with the drivers of our debt and deficits.'
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