The House GOP leadership isn’t giving any ground on President Barack Obama’s demand for a massive increase in the administration’s credit limit, setting the stage for another fiscal showdown by the end of February.
In the face of the GOP’s opposition, Obama may be backing down on his non-negotiable demand that an unconditional two-year increase in the debt-ceiling be included in any end-of-year “fiscal cliff” deal.
“A top Obama administration official” told The Huffington Post that “they don’t view an unresolved debt ceiling fight as too generous a concession because, as a matter of principle, the president will not negotiate with Republicans over raising it down the road.”
Obama is meeting with the four top congressional leaders mid-afternoon Friday to talk about the fiscal cliff, and if he doesn’t insist on his debt ceiling demand, he will remove one of the main obstacles that he added to a bipartisan deal.
So far, the statement from the Obama official is unconfirmed, and comes only two days after Obama’s Treasury secretary suddenly escalated the debt ceiling fight by declaring the government is going to hit its debt ceiling by the end of February.
Treasury Secretary Timothy Geithner announced the day after Christmas that the formal debt limit will be reached Dec. 31, but that temporary “extraordinary measures” can keep federal spending on track for two months.
Correspondingly, the GOP is highlighting its opposition to Obama’s debt ceiling demand.
“Any increase in the debt limit must be matched by a greater amount of spending cuts and reforms,” Brendan Buck, a spokesman for House Speaker John Boehner, told The Daily Caller. “It is perhaps the only mechanism capable of forcing Washington to deal with its spending problem,” he added.
If Obama drops the debt ceiling demand, he’s setting the stage for another round of budget talks in late February, during which the GOP will demand long-term spending reforms in exchange for an immediate increase in the debt ceiling.
Boehner’s stand on the debt ceiling may help to reunite his party after the pre-Christmas failure of his “Plan B” proposal.
The proposal failed among Democrats and a large slice of the GOP caucus. The proposed bill would have raised the tax rate on people earning more than $1 million per year. Democrats voted against the measure because they wanted to extend tax increases to include more investors and entrepreneurs.
The GOP’s small-government wing objected to Boehner’s Plan B, in part, because its provided Obama with a one-year extension of the debt ceiling.
For weeks, Democrats and Republicans have been arguing over a fix to the fiscal cliff, which is the synchronized expiration of tax cuts and arrival of spending cuts that would collectively suck $500 billion from the weak economy throughout 2013.
Obama and the four top Congressional leaders are scheduled to meet Friday afternoon to pursue a last-ditch bargain that would stay the pending tax increases and spending cuts.
Even a simple deal would be complex, because it would involve tax rates for the wealthy, tax exemptions for middle-class earners, plus extension of unemployment insurance and other provisions.
But if the Dec. 28 meeting does not include a repetition of Obama’s demand for a two-year increase, it likely would mean that Obama would has dropped his demand.
Without an increase in the debt ceiling, the federal government can’t borrow more money on the international market, leaving it reliant on taxes to pay its massive bills.
But current tax revenue is only enough to pay for the the first seven months of each year because the federal government is spending roughly $1 trillion above its tax income of roughly $2.5 trillion.
Before Christmas Obama demanded that the GOP allow him to raise the debt ceiling for two years. In practice, that would allow him to borrow another $2 trillion to fund the federal deficit for another two years.
“If Congress in any way suggests that they’re going to tie negotiations to debt ceiling votes and take us to the brink of default once again as part of a budget negotiation… I will not play that game,” Obama huffed Dec. 5 to a room full of business executives.
GOP leaders laughed off the demand, saying it would give away one of Congress’ core powers, and deny the GOP any means to slow federal spending.