The U.S. officially bumped up against the $14.3 trillion debt ceiling Monday, but rather than heading to the negotiating table, Members of both parties ran to the television cameras.
Treasury Secretary Timothy Geithner sent a letter to Congress on Monday outlining accounting maneuvers he is using to avoid breaching the debt ceiling until Aug. 2, when he projects the country will default on its obligations. He again asked Congress to approve a debt limit increase “as soon as possible” to avoid a global financial catastrophe.
However, with two months until the cutoff date, partisans on both sides are still trying to frame the debate before the deal-making begins in earnest — with Republicans attempting to assure the public there is no reason to fear a default and Democrats taking the opposite approach.
Minority Whip Jon Kyl (Ariz.), the Senate Republican negotiator in debt talks with Vice President Joseph Biden, said he was hopeful Republicans and Democrats could come together, and he dismissed worries about a default.
“I would not be concerned that the United States of America would ever default on its debt,” he said on the floor. “We won’t.”
But Kyl set a high bar for reaching a bipartisan deal. Echoing demands Republican leaders have insisted on for weeks, he called for reaching an agreement on spending caps for at least the next few years and cuts in the growth of entitlements, but no tax increases.
“We need to as a down payment be looking at about $2 trillion [in spending cuts] here,” Kyl said. “So far as part of our negotiation we’re only talking about a couple of hundred billion dollars.”
Republicans have largely embraced Speaker John Boehner’s (R-Ohio) call for spending cuts equal to the nearly $2 trillion debt limit increase that President Barack Obama is asking for.
On the other hand, Senate Majority Leader Harry Reid (D-Nev.) warned Republicans who have tied their potential support for any debt limit increase to deep spending cuts that a failure to raise the debt ceiling would be disastrous.
“We would be out of our minds” not to raise it, he said on the Senate floor. Lawmakers who have said they would vote against the debt limit hike are “willing to risk the strength of our economy just to make a political point.”
Reid said wasteful spending should be cut, but he pointed to tax breaks for oil companies as an example.
“The people who want to keep giving their Big Oil buddies $4 billion ... a year are the same ones who want to take the social safety net away from the sick, seniors and the poor,” Reid said.
The Senate is due to vote later this week on a bill eliminating $2 billion a year of those subsidies, but the measure isn’t expected to pass largely because of GOP opposition.
Though it would cut only a tiny sliver of the deficit, it has given Democrats a much-needed talking point on the deficit given that they have failed to bring a budget blueprint of their own to the floor amid internal disputes over the size of spending cuts and tax increases they should pursue.
Meanwhile, House Minority Leader Nancy Pelosi (D-Calif.) and the two House Democratic negotiators in the Biden budget talks — Assistant Leader James Clyburn (S.C.) and House Budget ranking member Chris Van Hollen (Md.) — met with financial leaders in New York.
In a CNBC interview, Pelosi said Medicare is “on the table” for the debt talks, but she said the discussion should start with rolling back payments to drug companies for the Medicare prescription drug benefit. She also joined Reid in suggesting that tax breaks for oil companies be eliminated.
After getting pummeled for weeks by Democrats over House Budget Chairman Paul Ryan’s (Wis.) proposal to overhaul Medicare, Republicans seized on Pelosi’s remark and demanded that she provide more details of a Democratic alternative. The National Republican Congressional Committee sent out a press release saying that Pelosi was “willing to cut Medicare.”
Ryan, meanwhile, headed to Obama’s hometown of Chicago to defend his budget and his Medicare plan, which appears dead from a legislative standpoint and has become the Democrats’ favorite weapon to attack Republicans from coast to coast.
Ryan argued his plan would give future seniors the ability to get to choose their health care providers, while Democrats’ proposals would require rationing what care seniors can get.
“The president’s plan begins with trillions of dollars in higher taxes, and it relies on a plan to control costs in Medicare that would give a board of 15 unelected bureaucrats in Washington the power to deeply ration care,” said Ryan, who is mulling a run for Senate after Sen. Herb Kohl (D-Wis.) announced last week he would not run for re-election.
Republican leaders continue to demand that any deal on the debt limit include significant spending cuts and no tax increases.
“Half-measures and gimmicks won’t get the job done, and tax hikes will only hurt job creation and do more damage to our economy,” Boehner said.
Kyl reiterated that tax hikes are off the table but said he would be open to negotiating a revenue-neutral tax reform package that would eliminate tax breaks for things such as ethanol production.
But Kyl said it would take much longer than two months to complete that work.
With the House out this week, Biden’s bipartisan talks have been put on hold. Although the negotiators made progress last week on some modest spending cuts, they haven’t yet made much headway on dealing with the larger questions of cutting entitlements such as Medicare and Medicaid.