This morning the Treasury officially requested that Congress raise the debt ceiling. This has been a long-anticipated move and Congress cannot fail to act as the consequences would be catastrophic: think downgrading our AAA credit status – in other words, sorry China, we will not be able to pay our debts.
But, the prospect of raising the debt ceiling presents the first big hurdle for Speaker John Boehner. The Tea Party wing of his caucus will most certainly not vote for what they deem more bloated government spending. But, any economist will tell you it has to pass. So, Republicans are demanding steep spending cuts in exchange for raising the ceiling. Those cuts could come in any number of ways, but conveniently the continuing resolution that is funding the U.S. government right now expires right as this vote is expected to come up, presenting the best opportunity to make cuts. Obama saved Pell Grants and a few other pet items during the lame duck negotiations on the current CR. Whether those survive the year seems increasingly unlikely. Also at stake? Funding to implement health care reform.
Boehner released a statement today in response to Treasury’s request:
“I’ve been notified that the Obama Administration intends to formally request an increase in the debt limit. The American people will not stand for such an increase unless it is accompanied by meaningful action by the President and Congress to cut spending and end the job-killing spending binge in Washington. While America cannot default on its debt, we also cannot continue to borrow recklessly, dig ourselves deeper into this hole, and mortgage the future of our children and grandchildren. Spending cuts – and reforming a broken budget process – are top priorities for the American people and for the new majority in the House this year, and it is essential that the President and Democrats in Congress work with us in that effort.”