House to Vote on $2.4 Trillion Debt Increase, Cuts
U.S. House Speaker John Boehner (R-OH), right, listens as U.S. House Majority Leader Eric Cantor (R-VA), center, answers questions during a press conference on a balanced budget amendment at the U.S. Capitol July 14, 2011 in Washington, DC. Photographer: Win McNamee/Getty Images
U.S. House Republicans plan a vote next week on a measure to raise the government’s debt limit by $2.4 trillion, cut spending, cap expenditures and include a proposed constitutional amendment to balance the budget.
While the plan could win acceptance by the Republican-led House, the Democrat-controlled Senate is unlikely to approve it, according to Representative Steny Hoyer of Maryland, the House’s No. 2 Democrat. It will enable Republicans to put their stance on the record while offering no immediate resolution to talks in Washington aimed at reaching a deficit-cutting deal by an Aug. 2 deadline for raising the U.S. debt ceiling.
“You’ll probably see the House vote on a couple of things just to make political statements,” President Barack Obama said at a news conference at the White House after the Republicans announced their plan.
A constitutional amendment requires a two-thirds vote of both House and Senate, and then ratification by states. “We don’t need a constitutional amendment to do that,” Obama said. “What we need to do is do our jobs.”
Republican Representative Sean Duffy, describing the party’s closed-door meeting, said: “For us, we’re effective in the sense that we say, ‘OK, we’re going to do the responsible thing by raising the debt ceiling,’ but also in the long term, we get our deficit and debt under control.”
Still, the House’s plan brings leaders no closer to a resolution of the debt talks that all parties will accept.
‘Fourth Quarter’
“We’re in the fourth quarter here,” House Speaker John Boehner of Ohio told reporters after a meeting of the House Republican caucus. He reiterated that his party won’t accept a tax increase as part of a package that congressional leaders have been negotiating with the president.
RepresentativesDuffy, of Wisconsin, and Billy Long, of Missouri, described the plan for next week’s House vote as they emerged from the caucus meeting on Capitol Hill.
Obama and congressional leaders from both parties have been meeting to search for a compromise that would cut the deficit and let the government sell debt after its borrowing authority is exhausted on Aug. 2.
Obama held the news conference today to continue to push for a deal that combines spending cuts with revenue increases. Republicans support the cuts while opposing higher taxes.
Obama pressed Republican and Democratic congressional leaders yesterday to give him options for a deficit-cutting deal that lawmakers could support as part of raising the nation’s $14.3 trillion debt limit by the August deadline.
“It is hard to do a big package,” Obama said today, reminding lawmakers that little time is left for an agreement. “We could end up with a situation where interest rates rise for everyone,” he said of failure to act before the deadline. In effect, he said, it would be “a tax increase for everybody.”
Long-term Deal
White House Chief of Staff William Daley said the president still wants as large a deficit-cutting plan as possible and believes “it is time to stop the rhetoric and start the action” on raising the debt limit. Daley, speaking at a U.S.- Korea Business Council dinner at the U.S. Chamber of Commerce in Washington last night, said Obama won’t accept a solution that doesn’t extend at least through next year, when he faces re- election.
‘Fiscal Sustainability’
The administration has warned that it will be unable to pay all its bills and that the nation’s credit rating will be downgraded, forcing higher borrowing costs, if the U.S.’s debt limit isn’t raised by Aug. 2.
“This is not only an issue of fiscal sustainability,” Daley said. “It is an issue of whether our elected officials can fulfill their most basic responsibility and fulfill the responsibilities that the American people sent them here to do.”
The Standard & Poor’s 500 Index rose 0.6 percent to 1,316.12 at 9:33 a.m. in New York. The gauge fell 2.6 percent this week through yesterday on concern the economic recovery is at risk as Europe’s sovereign-debt crisis grows. The Dow Jones Industrial Average advanced 58.58 points, or 0.5 percent, to 12,495.70.
The S&P 500 rallied 93 percent from its low in March 2009 through yesterday as the Federal Reserve used large-scale asset purchases to buoy the economy and companies posted earnings that beat analysts’ estimates. Of the 12 S&P 500 companies that have posted results so far this earnings season, 10 have beaten forecasts for per-share profit.
U.S. Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben S. Bernanke, in separate trips to the Capitol, made their cases for lifting the debt limit.
Adding more urgency to the dispute, Standard & Poor’s Ratings Services announced yesterday it may downgrade the U.S. top-level credit rating, saying there is an increasing risk of a substantial policy stalemate enduring beyond any near-term agreement to raise the debt ceiling.
‘Entangled’
The deadlock on fiscal policy has “only become more entangled” since April 18, when S&P placed a negative outlook on the U.S. AAA long-term rating, the service said in a statement. Moody’s Investors Service placed the nation’s credit rating under review for a downgrade on July 13.
Jeffrey Goldstein, Treasury undersecretary for domestic finance, said in a statement the warnings highlighted the need to “act expeditiously to avoid defaulting on the country’s obligations and to enact a credible deficit-reduction plan that commands bipartisan support.”
At a fifth consecutive negotiating session at the White House yesterday, Obama told congressional leaders to report to him by tomorrow morning on the type of deal their members can support, Democratic and Republican officials said.
Back-up Plan
The president wants the leaders to tell him whether they believe their caucuses can agree to a bipartisan deficit-cutting package of $2 trillion or more, or if they should resort to a backup plan that could raise the debt ceiling through the November 2012 elections while postponing detailed decisions about cuts.
Obama and lawmakers don’t plan to hold another negotiating session today, and instead the congressional leaders will focus on sounding out their colleagues, Democratic and Republican aides said on condition of anonymity.
House Republicans and Democrats scheduled separate caucuses today. Obama told the lawmakers he may call another meeting over the weekend if no path forward has emerged, officials from both parties said.
In an interview with WSB-TV in Atlanta, Obama said “America’s stressed out right now,” and that he has told Congress “don’t play games with this; we’ve got to make sure that we are fulfilling the full faith and credit of the United States of America.”
Tax Question
Republicans have demanded major spending cuts in exchange for their votes on the debt limit, while rejecting Democrats’ call for more tax revenue from high-income people.
Arriving back at the Capitol after yesterday’s negotiating session, Senate Minority Leader Mitch McConnell of Kentucky described it as “a good meeting.”
Officials from both parties described the session as cordial, following a tense meeting the previous day, and largely devoted to a presentation of options related to health-care spending and tax revenue. The White House pressed for an extension and possible expansion of the current 2 percentage point payroll tax deduction set to expire Dec. 31, said a Democratic official.
Before the White House negotiating session, Senate Democratic leader Harry Reid of Nevada and McConnell were engaged in their own talks on backup options to avert a U.S. default by adding spending controls to a plan that would grant the president unilateral power to raise the debt limit, Reid told reporters yesterday.
‘Last-Choice’
Senator Charles Schumer of New York, the chamber’s third- ranking Democratic leader, said, while Democrats still want to see a comprehensive deal emerge from the White House-led talks, they are considering modifying a plan McConnell offered earlier this week as a “last-choice” alternative.
McConnell’s proposal would grant Obama authority to raise the debt limit in installments unless Congress disapproves by a two-thirds majority -- a near impossibility with the Senate controlled by Democrats -- while Obama would also be required to offer spending reductions.
Those cuts would be advisory, and the debt-ceiling increase would occur regardless of whether lawmakers enact the cuts, McConnell said. The idea drew criticism from both sides of the aisle, particularly from Republicans who said it would fail to curb spending.
Commission Possible
Schumer said one option under consideration to build legislative support would couple the McConnell plan with a package of spending cuts smaller than the amount Republicans have demanded -- a dollar in spending reductions for every dollar increase in debt authority.
Another possible means of attracting votes would be to add a commission modeled along the military base-closing panels to recommend additional spending cuts, said two Republican aides familiar with the talks who requested anonymity.
Still, Senate Budget Committee Chairman Kent Conrad, a North Dakota Democrat, cast doubt on the options under discussion.
“I have not yet heard a package that I believe is credible in dealing with the debt that builds off of the McConnell plan,” he said.
Senior financial regulators came to the Capitol to highlight the economic consequences of a U.S. government default.
Geithner said there is “no way to give Congress more time” on lifting the debt ceiling. He commented after meeting with Senate Democrats.
“The eyes of the country are on us and the eyes of the world are on us and we need to make sure we stand together and send a definitive signal that we are going to take the steps necessary to avoid default,” he said.
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