Obama schedules potentially ‘catastrophic’ debt-ceiling ‘fiscal cliff II’ for February

Neil Munro | White House Correspondent

President Barack Obama scheduled another so-called “fiscal cliff” crisis for February by announcing late Jan. 1 he would refuse to negotiate any curbs on his use of the nation’s maxed-out credit card.

“I will not have another debate with this Congress over whether or not they should pay the bills that they’ve already racked up through the laws that they passed,” he claimed during a late-night appearance on the last-minute resolution to the December 2012 fiscal cliff.

However, the GOP-led Congress wants to use its authority over the nation’s debt ceiling to pressure Obama to shrink future spending, not to repudiate existing debts. (RELATED: House Republicans approve Senate fiscal cliff bill)

Obama is expected to add $3.4 trillion to the national debt by 2017. In his first term, he boosted the national debt by $5.8 trillion, up to $16.4 trillion.

But on Dec. 31, his government hit the $16.4 trillion limit agreed by Congress and Obama in 2011.

Federal officials say they’ll use a series of financial maneuvers to postpone any problems until February. But sometime after that, Obama’s administration won’t be able to borrow more money, and will have to use day-to-day tax revenues to fund the government’s myriad popular and unpopular programs.

Without any negotiations, Washington will be gripped by another fiscal crisis sometime in February, while the GOP and Obama battle for public support and international lenders consider further downgrades to the nation’s credit ratings.

Obama used his brief appearance Jan. 1 to claim that any limits on the government’s ability to borrow funds would be extremely dangerous.

“If Congress refuses to give the United States government the ability to pay [its] bills on time, the consequences for the entire global economy would be catastrophic,” he claimed.

Obama’s refusal to negotiate is partly caused by the GOP’s advantage in any debate over the debt ceiling.

In the 2011 debt-ceiling dispute, the GOP eventually pressured him to accept spending curbs in exchange for an increase to the debt limit up to $16.4 trillion.

Obama has repeatedly complained about that defeat.

On Jan. 1, he complained that “the last time this course of action was threatened, our entire recovery was put at risk. Consumer confidence plunged. Business investment plunged. Growth dropped. We can’t go down that path again.”

The debt is expected to reach almost $20 trillion by 2016 — equivalent to $80,000 for each working-age American — and then climb to almost $23 trillion by 2022.

Current tax revenues are enough to pay roughly 70 percent of federal bills, which include the interest payments on the existing debt.

Obama want to borrow even more money — roughly $850 billion per year — to expand government and operate many additional programs.

These programs include large green-tech subsidies, massive government-run healthcare programs and expensive welfare programs for healthy, working-age people.

GOP legislators say they won’t allow him to borrow more money unless he agrees to reform long-term government spending.

For example, various GOP leaders say Medicare should be reformed to give recipients and providers financial incentives to avoid wasteful medical spending, and fewer payments should be made to the wealthiest retirees.

Other activists say the GOP should end the subsidies and tax breaks enjoyed by Democratic-affiliated groups. These include Hollywood companies, universities and nonprofit groups exempt from many income taxes, investors in taxpayer-funded green-energy companies, and the unions’ lobbyists who are indirectly funded by local government’s tax-free bonds, as well as state tax levies that are now exempted from federal taxes.

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