U.S. Treasury Secretary Jacob Lew says the federal borrowing limit has to be raised by mid-October or the federal government might not have enough money to pay all of its bills. We may have survived the last two debt-ceiling fights fine, but looking at all the factors, this time its different, and maybe more dangerous.
By Peter Coy
August 27, 2013
Yup, it’s time for another debt ceiling fight. U.S. Treasury Secretary Jacob Lew says the federal borrowing limit has to be raised by mid-October or the federal government might not have enough money to pay all its bills. Before you get too blasé—we survived the last two debt-ceiling fights fine, after all—consider five factors that make this one different, and maybe more dangerous.
• Obamacare: This year’s debate has more emotional resonance than past ones because it’s not just about spending cuts this time. Republicans have warned that they won’t raise the debt ceiling unless Democrats give ground on the Patient Protection and Affordable Care Act. An aide to House majority leader Eric Cantor (R-Va.) told the Huffington Post that members are considering demanding that the law be postponed as a condition of a deal. Love it or hate it, Obamacare is something Americans have strong feelings about, in a way that they don’t relate to, say, 75-year deficit projections by the Congressional Budget Office. The passions engendered by the fight over Obamacare, pro and con, could make it harder to hammer out a debt deal.
• Crowded calendar: President Obama and Lew have vowed not to negotiate over the debt ceiling and are simply demanding that Congress raise it without conditions. But it will be hard to keep the debt ceiling out of the negotiations because Lew’s mid-October deadline is so close to the Oct. 1 start of the fiscal year. Republicans will want to use the debt ceiling vote to gain leverage in talks on the 2014 budget and the next phase of automatic spending cuts known as sequestration. “There’s absolutely no doubt that the debt ceiling is ripe for negotiations,” says Dan Holler, spokesman for Heritage Action for America, a sister organization of the conservative Heritage Foundation.
• Complacency: In past debt ceiling fights during the summer of 2011 and this past winter, Congress got a clear message from the business community that the national debt is not something to be trifled with. Perhaps lulled by the quiet conclusion of the last two debt ceiling battles, business hasn’t spoken as forcefully this time about the importance of avoiding a government default. Some Republicans in Congress may feel they have “running room” for brinkmanship, says Michael Linden, managing director for economic policy at the Center for American Progress, a Democratic think tank.
• Smaller deficit, soft growth: The federal budget deficit has shrunk faster than most people expected it to in the summer of 2011, the time of the first debt-ceiling fight, while the economy has stayed weaker. That combination has persuaded many Democrats in Congress that further budget cutting is a) not necessary and b) the wrong medicine for a weak economy. But many Republicans argue that further deficit cutting would actually help growth by restoring confidence. In other words, the economic situation has driven the parties farther apart.
• Boehner’s troubles: “There’s a big, big crucial moment coming” for House Speaker John Boehner (R-Ohio), says Steve Bell, senior director of economic policy at the Bipartisan Policy Center. Boehner probably can’t get a majority of Republicans in the House to vote for a debt ceiling increase in a form that would be acceptable to the White House, so he may be forced to do a deal that relies heavily on Democrats for support, Bell says. How Boehner finesses that will be crucial.
No matter what, it’s going to be a contentious autumn in Washington. Bell says a top congressional staffer told him, “Bring your Kevlar jacket.”
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