Facing an Aug. 2 deadline, Congress and the White House are stepping up face time to avert what the Treasury Department has called “catastrophic economic and market consequences” of a default on the national debt.
President Obama on Tuesday invited congressional leaders to the White House on July 7 to “drive toward a final agreement” on raising the national debt limit, now set at $14.3 trillion. Debt talks led by Vice President Joe Biden broke down on June 23, after GOP negotiators walked out in a dispute over tax increases.
The Senate canceled its July 4 recess to continue work this week on the issue. That shift gives both bodies 13 days in session together before the Aug. 2 deadline. Aides to House majority leader Eric Cantor (R) of Virginia renewed offers Tuesday to cancel the House break, now planned for the week of July 18, if needed.
Despite a sense of urgency acknowledged by both sides, partisan positions are still far apart. Republicans say that tax increases are off the table and that a debt deal must include trillions in spending cuts at least as robust as the trillions the White House aims to add to the debt limit. Democrats aim to protect entitlements such as Social Security and Medicare and are pushing for new spending to stimulate the economy.
Mr. Obama said on Tuesday that a “balanced approach” – combining spending cuts and tax increases, including cutting tax breaks for the rich – is within reach.
“I believe that right now we’ve got a unique opportunity to do something big, to tackle our deficit in a way that forces our government to live within its means, that puts our economy on a stronger footing for the future and still allows us to invest in that future,” Obama told reporters.
In response, House Speaker John Boehner (R) of Ohio said that tax increases, even those targeting unpopular loopholes, are not politically feasible.
“The legislation the president has asked for – which would increase taxes on small businesses and destroy more American jobs – cannot pass the House, as I have stated repeatedly,” he said in a statement. “The American people simply won’t stand for it. And their elected representatives in Congress won’t vote for it.”
“I’m happy to discuss these issues at the White House, but such discussions will be fruitless until the president recognizes economic and legislative reality,” he added.
But a point of growing consensus on Capitol Hill is a conviction that the Aug. 2 deadline is real and not going to change. The Treasury’s estimated deadline at which the US will no longer be able to borrow to pay its debts has shifted from as early as March 31 to July 8 and, now, Aug. 2. As recently as last week, some Republicans claimed that the deadline was fiction or, at least, would shift another a few weeks.
On July 1, the Treasury reaffirmed the current estimate, which has held since May 2. “The Treasury Department continues to project that the United States will exhaust its borrowing authority under the debt limit on Aug. 2,” said Mary Miller, assistant secretary for financial markets, in a statement.
One reason is that some $23 billion in Social Security payments come due on Aug. 3. “That big social security payment on Aug. 3 is very important as a priority,” says Jay Powell, a visiting scholar at the Bipartisan Policy Center and former undersecretary of the Treasury for finance during the first Bush administration. “Both parties understand that Social Security is a ‘third rail’ issue. We hope both parties will look at this and commit all the more to making some kind of a deal well before Aug. 2.”
If the Treasury were to pay only those bills for which it has income for the month of August, that could include interest on Treasury securities ($29 billion), Social Security benefits ($42.2 billion), Medicare and Medicaid ($50 billion), Defense vendor payments ($31.7 billion), and unemployment insurance benefits ($12.8 billion), according to the Bipartisan Policy Center. That leaves unpaid some $136 billion in bills, including $14.2 billion for federal salaries and benefits and $2.9 billion for military active duty pay.
“The debt limit has been offstage for years and suddenly it’s the main character, so people need to see what it really is,” adds Mr. Powell.
Senate majority leader Harry Reid (D) of Nevada had planned to use floor time this week to move a resolution on support for the US role in Libya, but many Republicans insisted that floor time this week be spent on the debt crisis.
“We are not going to talk about anything until we resolve this,” said Sen. Rand Paul (R) of Kentucky in a floor speech on Tuesday. Senate Republicans are calling for significant cuts in federal spending, statutory caps, and a balanced budget amendment. “If we have these, we will vote to raise the debt ceiling.”
Sen. Kent Conrad (D) of North Dakota, chair of the Senate Budget Committee, will unveil a budgetary roadmap to the Democratic caucus on Wednesday. Sen. Jeff Sessions (R) of Alabama, the top Republican on the Senate budget panel, plans to introduce a measure requiring that senators have at least seven days to study a final deal on the debt limit before having to vote on it.