GOP Raises Debt Ceiling

One day after being named to a presidential task force to negotiate deficit reduction, House Majority Leader Eric Cantor fired off a stark warning to Democrats that the GOP “will not grant their request for a debt limit increase” without major spending cuts or budget process reforms.

The Virginia Republican’s missive is a clear escalation in the long-running Washington spending war, with no less than the full faith and credit of the United States hanging in the balance.

In the most recent budget battle — over a six-month spending bill — Republican leaders carefully avoided threatening to shut down the government. Now, Cantor says he’s ready to plunge the nation into default if the GOP’s demands are not met. People close to Cantor say that he hopes to make clear that small concessions from Democrats, including President Barack Obama, will not be enough to deliver the GOP on a debt increase.

Democrats were quick to punch back.

“Congress will not permit the nation to default on its obligations because it would be beyond irresponsible to do so,” said Brian Fallon, a spokesman for Sen. Charles E. Schumer (D-N.Y.), in a statement to POLITICO. “Leader Cantor knows this, and should heed the many business leaders who are telling Republicans to stop playing games with the debt ceiling to gain political leverage.”

Republicans are floating a wide range of major structural reforms that could be attached to the debt limit vote, including statutory spending caps, a balanced budget amendment and a two-thirds vote requirement for tax increases and debt limit increases. Liberals want a “clean” vote to raise the $14.3 trillion borrowing limit.

Those in the center simply hope to find an accord that will prevent the nation from defaulting on its obligations and sending global markets into a tailspin.

The Treasury Department estimates the country will hit the debt ceiling between mid-May and July 8, and Democrats say it’s no time to play chicken with the standing of the nation’s credit — which has taken a hit already this week with Standard and Poor changing its outlook on U.S. debt from “stable” to “negative.”

“Mr. Cantor believes he has found political leverage in mixing the retroactive debt ceiling debate with the forward looking debt reduction debate. What he is willing to risk for this so-called leverage is a mid-air stall in America’s fledging economic recovery and the tarnishing of the full faith and credit of the United States of America,” said Vermont Rep. Peter Welch, who is leading House Democrats in demanding a “clean” vote. “America pays its bills. It always has and it always will. Holding that solemn tradition hostage in a game of kamikaze budget politics is reckless, irresponsible and playing with fire.”


Republican leaders have said all along that the public won’t stand for a debt-limit increase that doesn’t include spending reforms, but Cantor’s comments Wednesday suggest a deeper line in the sand. And the term “serious” reforms suggests Republicans may want a stronger long-term spending agreements in place before they schedule a debt limit vote.

It’s a tricky issue that divides the parties from traditional allies.

The Chamber of Commerce, which typically aligns with Republicans, has been working hard to ensure that the debt limit is increased, and the Washington Post’s editorial page, a traditional voice for liberals, argued on Wednesday morning that deficit-reduction measures must be attached to any debt-limit increase.

Aside from his post in leadership, Cantor’s remark carries additional significance because he is the House Republican representative on a White House panel slated to examine the nation’s deficit in the months leading up to the debt ceiling increase. The Virginia Republican also warned that the panel, led by Vice President Joesph R. Biden and composed of members of Congress, needs “a clearly defined mission and a targeted purpose to be accomplished within a specific and binding timeframe.”

It sets the stage for an incredibly tricky political dance in the next few weeks between Senate Democrats, the White House and House Republicans over an issue that could shake international markets and the fragile economic recovery.

House Speaker John Boehner’s office played down any difference in degree between Cantor’s remarks and those made in the past by Boehner, a Republican from Ohio. Boehner has said the “American people will not stand” for a debt ceiling increase “unless it is accompanied by serious action to reduce our deficit.”

And in a statement issued to POLITICO before Cantor’s release on Wednesday, Boehner spokesman Michael Steel said “The President has asked us to raise the debt ceiling, but the American people won’t tolerate an increase if we don’t begin to address the problem of ever-higher spending and debt. House Republicans are listening, and we will insist on real spending cuts and reforms in this debate.”

Congressional Republicans have still yet to coalesce around which spending cuts or process overhauls they’ll seek as an attachment to the debt-ceiling vote. Lawmakers are out of town for a two-week recess, slated to return the first week in May.

But several options are being bandied about in GOP circles.

One possibility that has gained some traction among Republicans is statutory spending caps to both mandatory and discretionary spending.

Cantor has casually floated a proposed amendment to the Constitution, originally written by Sen. Mike Lee (R-Utah), that would require the budget to be balanced by prohibiting spending from outstripping revenue in any year without a two-thirds vote of each chamber of Congress.


It would also require two-thirds votes for tax increases and debt-limit increases, as well as capping federal spending at 18 percent of the nation’s gross domestic product.

Sen. Bob Corker’s (R-Tenn.) “CAP Act” proposal is also a popular alternative among Republicans and Democrats in both the Senate and House. It sets a cap on all spending, aiming to bring outlays down to roughly 20 percent of GDP. It also mandates that the Office of Management and Budget make cuts throughout the federal budget if Congress is unable to get spending down the mandated level.

House Republicans may try to attach elements of their recently passed budget to a debt-limit package. Block-granting Medicaid to states is one proposal that has gotten strong support in GOP circles and among a handful of Democratic officials at the state level.

Several GOP sources said Republicans could also move to limit the growth of federal bureaucracy by capping the federal workforce — a plan sure to be derided by Democrats as an instant job-crusher.

At this rate, the debt ceiling will be the all-consuming battle going into the summer, and it provides the GOP what they’ve dubbed as another bite of the apple – essentially another opportunity to cut spending and reform how Washington spends money.

The debt ceiling has been raised 74 times since 1962. In most cases, debt-limit increases have been tied to other bills in an effort to ensure support for both measures. For example, the Democrats’ stimulus law in the last Congress raised the debt ceiling, as did several budget resolutions passed in the past few decades.

House Republicans are also trying to frame the debt ceiling increase as belonging to Obama: They say that if he wants to raise it he has to sell it to the American people. Democrats – in the House, Senate and White House — seem to have accepted the fact that the debt ceiling will almost certainly need to be coupled with other spending control measures.

But they are far from agreement with Republicans on the specifics.

As Republicans flex their muscles on the upcoming vote, House Majority Whip Steny Hoyer of Maryland is seizing on a promise in the GOP’s 2010 “Pledge to America” to “advance major legislation one issue at a time” to scold Republicans.

“I think that to hold hostage the full faith and credit of the United States of America to another agenda item is wrong. In fact, the Republicans pledged that they would not do that,” Hoyer said. “And, in fact, they said, and Mr. Boehner has said, that he would keep separate divisive issues from important bills and he would take them up individually. That is what ought to be done here.”