Republicans set to step back from debt showdown

WASHINGTON – Republicans controlling the House of Representatives are stepping away from an immediate battle with a second-term President Barack Obama and the possible first-ever default on U.S. obligations, preparing instead to vote Wednesday on a measure that would suspend for nearly four months the requirement for Congress to approve a higher limit on American borrowing.

At issue is the country’s debt — nearly $16.5 trillion and rising fast. That is the cumulative amount the country owes as a result of routinely spending more than it collects in taxes. U.S. law requires that Congress approve raising the amount the government can borrow to pay its obligations — such as payments to contractors, unemployment benefits and interest payments to U.S. bondholders — as the debt exceeds the previous limit.

In an indication of the continuing partisan rancour gripping Washington, Republicans had been threatening to use Congressional power over the federal purse strings to exact spending cuts from the Obama administration and Democrats that would equal the increase in the so-called debt ceiling. Republican budget cutters have long targeted the U.S. social safety net programs: Medicare health insurance for Americans 65 and older, Medicaid insurance payments that cover the poor, and Social Security, the federal pension for Americans of retirement age.

But the Republican leadership in the House decided to step back from an immediate confrontation by suspending the required approval of raising the debt limit until May 18, apparently deciding that Obama held the upper hand over congressional Republicans following his easy re-election to a second term in November.

The legislation does not set a specific limit; rather it would automatically increase the limit by the amount required to fund U.S. government obligations through that date.

Even before his inauguration earlier this week, Obama rejected Republican threats not to approve raising the borrowing limit, saying he would not allow the opposition to “hold hostage” the “full faith and credit” of the United States.

House Republicans appear confident that they’ll have the votes to pass the measure even though most Democrats are expected to vote against it because it sets the stage for another potential debt crisis this summer.

On Tuesday, his office of Management and Budget said the Obama administration would not oppose a short-term solution to the debt limit because the new Republican legislation “lifts the immediate threat of default and indicates that congressional Republicans have backed off an insistence on holding the nation’s economy hostage to extract drastic cuts.”

It also appeared that Senate Democrats would grudgingly accept the bill.

In his inaugural address on Monday, Obama was formidable in re-emphasizing his support for the key social programs.

While acknowledging the need to cut the deficit, Obama declared: “We reject the belief that America must choose between caring for the generation that built this country and investing in the generation that will build its future. ”

The House Republicans’ legislation is also aimed at prodding Senate Democrats to pass a budget after almost four years of failing to do so. It would withhold the pay of lawmakers in either the House or Senate if their chamber fails to pass a congressional budget resolution by April 15. House Republicans, who regained majority control of the chamber in 2010, have passed budgets for two consecutive years, but the Senate, that has been in Democrat hands throughout Obama’s first term, hasn’t passed one since his first year in office.

Under Congress’ arcane budget procedures, a congressional budget resolution is a nonbinding measure that tries to set parameters for future legislation setting agency budgets and federal benefit programs like Medicare.

On Sunday, New York Democratic Sen. Chuck Schumer said the Senate would do just that and would use it to call for follow-up legislation that would increase revenues. Most Republicans are dead set against higher taxes, contending that would only prove a drag on an already weak economic recovery. In the House especially, members of the Republican tea party faction won their place in Congress by promising constituents to shrink government and lower taxes.

Democrats have generally reacted coolly to the debt-limit extension. They look also at other upcoming fiscal flash-points, including sharp, across-the-board spending cuts that would start to strike the Defence Department and domestic programs alike on March 1 and the possibility of a partial government shutdown with the expiration of a temporary budget measure on March 27.

While serious stumbling blocks, those deadlines are far less consequential than defaulting on the country’s debt. Until the Republicans regained control of the House two years ago, raising the debt ceiling occurred, largely, as a matter of legislative course. But in 2011, the big fight that ensued over that debt ceiling led to the first downgrading of the American debt in the country’s history, despite a last minute deal that saw both Obama and the Republican opposition give ground.

The across-the-board cuts would pare $85 billion from this year’s budget after being delayed from Jan. 1 until March 1 and reduced by $24 billion by the recently enacted tax bill. Defence hawks are particularly upset, saying the Pentagon cuts would devastate military readiness and cause havoc in defence contracting. The cuts, called a sequester in Washington-speak, were never intended to take effect but were instead aimed at driving the two sides to a large budget bargain in order to avoid them.

But Republicans and Obama now appear on a collision course over how to replace the across-the-board cuts. Obama and his Democratic allies insist that additional revenues be part of the solution; Republicans say further tax increases are off the table after the 10-year, $600 billion-plus increase in taxes on wealthier earners forced upon Republicans by Obama earlier this month.

“We are not going to raise taxes on the American people,” House Speaker John Boehner told reporters.

According to the latest calculations, which account for the recent reduction of this year’s sequester from $109 billion to $85 billion, the Pentagon now faces a 7.3 per cent across-the-board cut, while domestic agency budgets would absorb a 5.1 per cent cut. The calculations are not official but were released Tuesday by Richard Kogan, a budget expert with the Center on Budget and Policy Priorities think-tank .

With the debt ceiling issue back front and centre in the partisan fight in Washington — even though delayed for several months — Democrats continue to criticize Republicans for using the debt limit as a tool to push their attempts to cut social programs and require a fight over the debt every few months.

“We should not be doing this three months at a time. We should resolve these issues, and we should not be playing games with the debt ceiling,” said Rep. Chris Van Hollen, a Maryland Democrat.

If the debt cap is not raised, the government would default on its obligations by as early as Feb. 15, the Treasury says.




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