Much of the rhetoric to date over the fiscal cliff has been on taxes, but lawmakers on Wednesday finally began to zero in on what might be the most difficult piece of the budget puzzle: raising the debt ceiling.
Democrats insist publicly that the GOP should meet both their major demands: raise taxes on annual income of more than $250,000, and get Congress out of the business of affirmatively raising the debt limit.
From the White House’s perspective, the debt ceiling fight of the past summer showed that markets and voters have no patience for brinkmanship when it comes to the full faith and credit of the United States. But Republicans, led by Speaker John A. Boehner of Ohio, have long insisted that the debt limit vote is their strongest point of leverage. And they don’t seem close to relenting.
The Republican position became clearer Wednesday as the GOP seemed to sense that it was time to draw bright lines on the issue. Meanwhile, Democrats doubled down on their stance that continuing to allow lawmakers to use the debt limit as a political tool would create an untenable situation going forward.
“I have to just tell you that is a bad strategy for America. It is a bad strategy for our businesses. And it is not a game that I will play,” President Barack Obama told business leaders at the White House. He was referencing the GOP’s inclination to use a debt ceiling vote to extract spending cuts from Democrats.
“There’s no uncertainty like the prospect that the United States of America, the largest economy that holds the world’s reserve currency, potentially defaults on its debts; that we give up the basic notion that the United States stands behind its obligations,” Obama continued.
The conversation surrounding the debt ceiling had been mostly muted. Even sources on the Democratic side conceded weeks ago their members were more concerned about tax rates. But the effects on markets of a potential default — or at least the threat of it — makes the issue the sleeping giant of the fiscal cliff talks.
The U.S. government will hit the debt ceiling sometime around the end of 2012, but Treasury can take extraordinary measures to extend the government’s borrowing capacity until the first few months of 2013.
But rather than give more power over the debt limit to the president, GOP rank-and-file members Wednesday began to fall in line behind their leaders’ opposition to the White House’s desired changes to debt ceiling votes. The Obama administration pitched a procedure modeled after the one proposed by Senate Minority Leader Mitch McConnell, R-Ky., as part of the 2011 debt limit deal, known as the Budget Control Act. The procedure would allow Congress to disapprove of any debt limit increases, but the president could still veto those resolutions of disapproval. (See the graphic below that explains how the McConnell provision works.)