Shutdown Odds Rise as House Republicans Gear Up for Debt Limit Fight

Prepare for a lengthy showdown that could rattle markets and endanger the U.S. credit rating

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Jason Reed / Reuters

House Speaker John Boehner speaks to the press after a House Republican meeting on Capitol Hill in Washington D.C., Sept. 26, 2013.

The odds of a damaging government shutdown climbed higher on Thursday, as House Republicans looked beyond next Monday’s deadline to pass a stopgap funding bill and laid out a series of demands in exchange for lifting the federal debt limit in mid-October.

The move reflects House Republican leadership’s conviction that the party is better positioned to extract concessions from Senate Democrats and the White House in a debt-ceiling fight than in the battle over a temporary government funding bill, which both chambers must pass by midnight on Monday, Sept. 30. Such a strategy foreshadows a lengthy fight that could rattle markets and endager the U.S. credit rating.

More immediately, it douses Democrats’ hopes that House Republicans would accept a Senate proposal to fund the government at current levels. “I do not see that happening,” House Speaker John Boehner said of the prospect that his conference would pass the measure that is expected to clear the Senate this weekend.

As they trickled out of the closed-door meeting in the bowels of the Capitol on Thursday, House Republicans said they did not feel much urgency to reach a compromise to avert a government shutdown. Indeed, several members said the majority of the discussion focused not on the so-called continuing resolution to fund the government, but rather on the debt limit, which the U.S. is projected to reach on Oct. 17, according to Treasury Secretary Jack Lew. “We’ll continue to fight,” said Representative John Fleming of Louisiana, who said the conference discussed contingency plans in the event of a shutdown.

Other members of the conference said they preferred to work to stave off a shutdown before turning to the debt-limit scuffle. But much of the House GOP, suspended in what to most observers seems to be a state of willful disbelief, refused to rule out the possibility that the Senate would have a sudden change of heart and defund the Affordable Care Act. “Three weeks ago, we thought we’d be invading Syria,” shrugged North Carolina Representative Mark Meadows.

Instead, Republican leaders are trying to unite their fractious conference to coalesce around a bill that attaches a panoply of conservative policies to a roughly 14-month debt-limit increase. These include a yearlong delaying implementation of Obamacare, approving the Keystone XL pipeline, reforming the tax code and paring back environmental regulations.

Those items are non-starters for Congressional Democrats and the White House. President Barack Obama has said repeatedly that he will not negotiate over the U.S. borrowing authority. On Thursday, he reiterated that he would veto any legislation that tampers with the Affordable Care Act, the signature legislative achievement of his first term. “Not going to happen, as long as I’m President,” Obama declared Thursday.

But Republicans believe they have the public on their side, and point to a new Bloomberg News poll in which 61% of respondents said spending cuts should be a required condition of a debt-limit hike, even if a stalemate triggers default. In addition, they believe Obama is bluffing, and reason that by raising the stakes, they can force Obama to fold. “We’re going to introduce a plan that ties important spending cuts and pro-growth reforms to a debt limit increase,” Boehner told reporters in the Capitol. “Now the president says, ‘I’m not going to negotiate.’  Well, I’m sorry, but it just doesn’t work that way.”

The approach portends a bare-knuckle brawl over the next month, with the full faith and credit of the U.S. hanging over the bout. Breaching the debt limit, economists believe, would be more calamitous than a simple government shutdown. It is hard to see a logical compromise between the two sides’ positions.

And even if Democrats were to buckle, it is far from clear that Republicans can coalesce around anything, even a fantasy wish list. Several House conservatives emerged from the strategy session Thursday unconvinced that the grab bag of demands was enough. “It definitely has a lot of goodies in it,” said Alabama Congressman Mo Brooks. “Still, you have to address the spending problem.” Brooks said he was undecided, but did not seem inclined to support the package. Others said flatly they would vote no.

Which leaves Congress just days until a shutdown, with no solution in sight and another, bigger fight looming. And that is just how many House Republicans want it. They seem concerned neither about dragging the nation into a high-stakes fiscal fight for the third time in as many years, nor of the potential political and economic consequences. “People have to realize that there’s never any compromise until the stakes are high,” said Republican Representative Dana Rohrabacher of California. “There’s never progress without risk.”