Debt Collision Course
President Obama issued a stark warning Monday night to the nation about the economic crisis that awaits the country if Congress fails to raise the nation’s debt ceiling in time to beat a default deadline just eight days away. “Interest rates would skyrocket on credit cards, mortgages, and car loans, which amounts to a huge tax hike on the American people,” Obama warned. “We would risk sparking a deep economic crisis—one caused almost entirely by Washington.”
As he laid out the consequences of failure, Obama also explained his preference for getting a deal with a “balanced approach” to cut the deficit using both spending cuts and tax increases. He also denounced the GOP’s threats to let the government default if a debt-reduction package deal includes any tax increases at all. “That is no way to run the greatest country on earth,” Obama said. “It is a dangerous game we’ve never played before, and we can’t afford to play it now.”
Obama laid out the contours of his plan to cut $4 trillion from the budget, but tried to elevate his message beyond numbers and charts to a bipartisan appeal to Americans, asking them to contact their representatives in Washington and urge them find a compromise all sides can agree to before next week. “I’m asking you all to make your voice heard,” he said. “If you want a balanced approach to reducing the deficit, let your member of Congress know.”
Moments after the president spoke, House Speaker John Boehner responded with a televised address of his own, explaining his unsuccessful efforts to rein in federal spending as the first condition for raising the debt ceiling past its $14.3 trillion limit. “I want to tell you, I gave it my all. Unfortunately, the president would not take yes for an answer,” Boehner said. “The president wanted a blank check six months ago and he wants a blank check today. It’s just not going to happen.”
Obama and Boehner spoke after a day of name-calling and finger-pointing on Capitol Hill, where Democratic and Republican leaders unveiled dueling budget plans after failing over the weekend to find a compromise to avert a default on the nation’s debt.
“Instead of moving forward, we went back,” Senate Majority Leader Harry Reid said at a Capitol Hill press conference, warning that Republicans’ intransigence in the debt talks would put the global economy at risk “This isn’t a game of chicken, it’s a game of reality.”
Reid also laid out his proposal to slash $2.7 trillion from the budget over the next 10 years in exchange for congressional approval of a debt-ceiling increase that would last past the 2012 elections. In addition to $1.5 trillion in cuts to discretionary spending, Reid said, Democrats would save roughly $1 trillion in Pentagon spending over the next 10 years by ending the wars in Iraq and Afghanistan. In a major concession to Republicans, Reid’s plan has no mechanism for raising taxes or revenue, a condition liberal Democrats have insisted on for months.
Just after Reid’s press conference, Boehner went to a podium across the Capitol to slam Reid’s plan as “full of gimmicks” and to suggest his own two-step proposal, which would raise the debt ceiling in time for next week’s deadline, but not long enough to get past the 2012 elections.
First, Boehner said he would cut $1.2 trillion from the federal budget immediately, while asking Congress to approve a $1 trillion increase in the debt ceiling, a sum just large enough to last through early next year and force another debt standoff in early 2012. Next, Boehner said he would call for a vote on a balanced-budget amendment to the Constitution and form a bipartisan, 12-member committee to find an additional $1.8 trillion in cuts from discretionary and entitlement programs for the following years. Although Boehner said the plan was a common-sense approach, he admitted it was “less than perfect.”
Reid predictably slammed Boehner’s pitch as a nonstarter, but less predictably, conservatives in Boehner’s own caucus moved quickly to say they would vote against Boehner’s idea. Within minutes of the speaker’s press conference, Rep. Jim Jordan of Ohio, the leader of the Republicans’ think tank in the House, said he would oppose the speaker’s plan, which he said would not truly solve the national debt crisis. “The credit rating agencies have been clear that no matter what happens with the debt limit, the U.S. will lose its triple-A credit rating unless we produce a credible plan to reduce the debt by trillions of dollars,” Jordan said. Rep. Jason Chaffetz, a high-profile young conservative from Utah, said he’d also be voting no.
Away from Capitol Hill, leaders of the conservative Cut, Cap, and Balance coalition were equally negative. “As we stated this morning, Cut, Cap and Balance is not merely a legislative framework; it is a series of principles,” the leaders said in a statement. “Principles are not subject to negotiation. Unfortunately, the speaker’s plan falls short of meeting these principles.”
On the Senate side, both Republicans and Democrats said they need to see more details of both plans before they could decide how to vote on them. Reid announced that the proposals would come up for a vote in the House and Senate on Wednesday, giving members less than two days to read and digest the legislation.
Sen. Jeff Sessions of Alabama, the top Republican on the budget committee, said he had not seen details of either plan and would not vote for any legislation until he’s read and considered it. “Majority Leader Reid produced a one-page summary of his plan this afternoon and said, ‘Not to worry… it will be good for America,’” Sessions said, mocking Reid. “‘Do what I tell you and go along and mind your manners and we’ll get this thing taken care of. Trust me.’ Well, the American people have been trusting Washington for too long.”
Despite possible conservative defections from Boehner’s plan in the House, Senate sources predicted Monday that the speaker has a far better chance of passing his bill through Congress than Reid because Boehner’s proposal will almost certainly pass the House on Wednesday and force the Senate and the president to take the risk of blocking the House-passed plan at the 11th hour.
“They’re essentially daring the Democrats to let the country default,” said the source.