Between now and August 2, Congress is highly likely to vote to raise the federal debt limit. And yet, much of what you read and hear seems to suggest otherwise. News headlines are forbidding. Business gurus issue dark warnings; Administration officials stress the “catastrophic” consequences of default. Ratings agencies claim to be spooked. Tea Party groups and their proxies in Congress, who treat their victory in negotiations over this year’s budget like a loss, are vowing not to back another weak compromise. One political analyst told U.S. News that his shop pegged the odds of Congress failing to get the deal done at 1-in-3.
Take the long side of that bet. The prevailing force in Congress is the impulse for self-preservation, and House Republicans recognize the political dangers of causing the U.S. to default on its obligations. Yes, there is a contingent of Capitol Hill conservatives — the debt-limit “deniers,” as they’ve been dubbed — who downplay the economic damage it would inflict. But the difficulty of explaining their vote to pitchfork-wielding Tea Parties would be far easier than explaining why the markets went haywire. Even the brashest belt-tightening freshman may blink at the prospect of being blamed for economic catastrophe.
GOP aides acknowledge the pressure business lobbies are applying to their bosses. “Groups have brought up the importance of the issue,” one concedes. But the full-court press is now beginning in earnest. At a Chamber of Commerce event on Monday in Atlanta, Chamber President Tom Donohue had a pointed message for Republicans who won’t raise the borrowing limit: “We’ll get rid of you.” Wall Street is fed up with the debt-limit brinkmanship; John Boehner received a chilly reception when he laid out Republican demands in New York City last month. In Atlanta, Donohue offered the House Speaker the kind of backhanded compliment that can leave a mark. “He’s growing into his shorts,” Donohue said. “He’s put on his big boy pants.”
The line in the sand Boehner drew — that the $2.4 trillion required to increase borrowing obligations through the end of 2012 be offset by commensurate spending cuts — has been adopted by his Senate counterparts. “If we can’t get about $2 1/2 trillion in real savings, then I don’t think there would be much of an appetite to raise the debt ceiling by $2.4 trillion,” Senate Minority Whip Jon Kyl, one of two Republicans in the group of negotiators led by Vice President Joe Biden, said last week. Biden’s group is increasing the frequency of its sessions, and plans to meet three times per week until a pact has been struck. In Biden, Democrats have a savvy point man. “I’ve been very impressed with the way he conducts these meetings,” House Majority Leader Eric Cantor said of the Vice President on Monday. “He does like to talk, but I think that, I guess, all of us do or we wouldn’t be here. I do really think he has conducted these meetings in a way that’s kept the ball rolling.”
Even so, the ball hasn’t rolled very far. The quickening pace of the talks reflects the need to make a deal well before August 2 — July 4 is the target — so that lawmakers have time to write and review the legislation. This would be a rarity in Congress, which is often jolted into action only by looming deadlines. “Look, we’ve been around this business enough to know that typically these things do come down to the deadline. That won’t surprise me if it’s Aug. 2,” House Republican Jim Jordan said.
Last week, 103 members of the hard-line Republican Study Committee, which Jordan chairs, sent a letter to House GOP leadership outlining its three-pronged approach to deficit reduction: halve the deficit by next year through a mix of discretionary and mandatory spending cuts; introduce a trigger that automatically caps spending at 18% of GDP, which was the 40-year average from 1970 to 2009; and send a balanced-budget amendment to the states for ratification. Conservative advocacy groups swooned. The lawmakers called it a chance to make “a bold statement.” But that’s all it is. Democrats will balk, and the co-signers of the proposals didn’t hem themselves in by vowing not to support anything less. “The Democrats have given up, saying that the only answer to excessive borrowing is more borrowing,” the authors wrote.
That isn’t true. To the chagrin of progressives, Democrats have essentially abandoned their stance that the government should intervene to boost sluggish growth. Leery of being pigeonholed as free-spenders, they’ve long since shied away from a renewed push to stimulate the economy to avoid being portrayed as big-spending liberals. One option for promoting growth is extending or increasing the payroll tax cut the two parties agreed to in December, which theoretically should spur hiring by reducing the burden of worker wages. Speaking Monday in North Carolina, Obama appeared to support extending the cut past December, when it expires. The idea should resonate with Republicans, who favor measures that lessen the strain on businesses, but a temporary extension alone wouldn’t offer any long-term assurances for job-creators.
Meanwhile, Democrats in the Biden group have already agreed to more than $1 trillion in spending reductions. Republicans want some $2.5 trillion all told. There are significant sticking points: Republicans, in defiance of the vast majority of budget analysts, are ignoring revenues. Democrats, determined to keep battering the GOP for voting to “end” Medicare, are skirting entitlement reform. Something has to give. And the GOP’s Tea Party wing, which sees the debt limit as its last change to deliver on its campaign promise to reform the culture of spending in the Capitol, is particularly insistent that the deal not be a mirage a la the 2011 budget deal, when $38.5 billion in cuts were later judged by the CBO to effect a mere fraction of that in real outlays.
But House Republican aides say they expect their side to swallow a deal to avoid a full-blown meltdown. Several aides say they expect fewer defections than the 54 members who voted to shut down the govenrnment in the spring. Despite the series of polls that portrayed the public as opposed to a debt-limit increase, members will have political cover: 51% of respondents in a recent ABC News/Washington Post poll said they would support a debt-ceiling hike if it was paired with “deep cuts” in spending on federal programs. And the stakes are too high. “The full faith and credit of the United States is the underpinning not only of our way of life, it’s also the underpinning of a global financial system,” President Obama said Monday in an interview on NBC’s Today. “We could actually have a reprise of a financial crisis, if we play this too close to the line. So we’re going be working hard over the next month.”