A huge battle awaits Republicans and Democrats when Congress returns in two weeks and debate begins over whether to raise the nation’s $14.3 trillion debt limit. Treasury Secretary Tim Geithner informed Congress that the nation’s borrowing limit will be reached May 16, leaving him with only enough wiggle room to pay the nation’s bills until July 8. After that, if Congress doesn’t raise the limit, the United States will start defaulting on loans and interest rates will skyrocket, shattering the already fragile economy.
“Congress is going to have to raise the debt limit,” Geithner declared on NBC’s “Meet the Press” over the weekend. “They understand that. That’s absolutely essential to preserve the creditworthiness of the United States of America. We’re a country that meets its obligations and we have to meet our obligations, and they recognize that.”
But the legions of fiscally conservative Republicans in Congress, many elected last November by an anti-spending electorate, oppose raising the debt limit unless the move is paired with big spending cuts that will reduce the nation’s $1.3 trillion deficit. Many GOP lawmakers have promoted the idea of letting the nation reach the debt limit rather than borrow more money.
House Speaker John Boehner, R-Ohio, said last week the only way he will be able to round up the GOP votes needed to raise the limit will be if President Obama and Democrats agree to take “meaningful steps toward solving our debt problem.”
Underscoring the nation’s budget woes, the rating service Standard and Poor’s downgraded its long-term outlook on Washington’s ability to bring the massive budget deficit under control from “stable” to “negative.” The service concluded that there was a one-in-three chance that the nation could lose its top investment rating in the next two years.
“Serious reforms are needed to ensure America’s fiscal health, and today S&P sent a wake-up call to those in Washington asking Congress to blindly increase the debt limit,” House Majority Leader Eric Cantor, R-Va., said.
For the GOP, the solution is a simple one: Cut spending, and cut it significantly across domestic programs and entitlements. House Budget Committee Chairman Paul Ryan, R-Wis., proposed a 2012 budget that slashes spending by $4 trillion over 10 years and reduces the cost of Medicaid and Medicare in part by curbing eligibility.
But Democrats have a much different plan. President Obama announced that he wants to cut $4 trillion over 12 years, but through a more “balanced” approach. His plan would include fewer domestic cuts, reduce military spending and raise taxes on wealthier Americans.
Republicans will likely end up pushing Democrats to accept some aspects of the Ryan budget plan, such as his proposed cap on discretionary spending, in exchange for agreeing to vote for a debt limit increase.
The GOP rank-and-file will be much less likely to settle on a compromise like the $38 billion budget deal the two parties struck last week to avert a government shutdown, which angered many conservatives who wanted deeper cuts.
“There are any number of things they can demand,” Marc Thiessen, who was a top aide to President George W. Bush, told the Washington Examiner. “But it has to be big.”
