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 The call by House of Representatives Speaker John Boehner for
deficit-reduction steps was an attempt to answer the concerns of the
smaller-government Tea Party activists who populate his
rank-and-file.
But a series of obstacles could thwart Boehner's plans. Democrats
are promising to close ranks behind President Barack Obama, who has
insisted on a "clean" debt limit hike that allows the federal
government to continue paying its obligations.
And Boehner's own Republicans are divided over which
deficit-reduction measure or measures to link to the debt hike
legislation.
As House Republicans met behind closed doors to hash out a strategy,
financial markets showed some early signs of jitters over the debt
ceiling, as investors pushed the interest rate on an $8 billion
one-month Treasury bill auction to the highest level since the
government shutdown in October.
The Treasury also began to employ extraordinary cash management
measures to ensure that it can pay its bills after a temporary
extension of borrowing authority expires on Saturday.
Treasury Secretary Jack Lew has warned Congress that it must act by
the end of February to raise his borrowing authority or risk a
historic debt default.
"Nobody wants to default on our debt," Boehner told reporters
following his meeting with rank-and-file Republicans.
Boehner added that while Republicans advance legislation to raise
the U.S. borrowing authority, "We ought to do something about jobs
and the economy, about the drivers of our debt."
His comments came as the non-partisan Congressional Budget Office
released forecasts estimating this year's budget deficit would fall
to $514 billion. While sizeable, that would be down from the
wrenching deficits of $1.413 trillion in fiscal 2009 and $1.3
trillion in both 2010 and 2011, which fueled heated spending-cut
debates.
CBO also said that the budget deficit would fall further in fiscal
2015, to $478 billion.
Congressional aides from both parties have acknowledged that the
trajectory of budget deficits could take the edge off Tea Party
demands for a new round of spending cuts.
Republicans had hoped an end-of-February deadline for raising the
debt ceiling or risking default would give them an opportunity to
slip in some new government savings.
If there is one thing Congress does well it is react to an imminent
crisis. On a superficial level, the CBO numbers offered the
opposite: dwindling budget deficits as the economy recovers.
That likely means that for the next year or two, large-scale deficit
reduction could be off the table, especially with Republicans more
focused on repealing Obamacare than tackling tax and entitlement
reforms that could fix budget headaches.
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MORE THAN ONE ROADBLOCK
Besides Tuesday's CBO report, two other roadblocks stood in the way
of Republican attempts to attach deficit-reduction measures to a
debt limit increase.
The biggest obstacle is Democrats, who vow to enforce Obama's demand
that there be no negotiations on a debt limit bill and that a
simple, "clean" extension be enacted.
Senator Patty Murray, a Democrat who heads the Senate Budget
Committee, urged that a no-strings-attached debt limit bill move
through Congress promptly. "The longer Republicans take to dream up
empty debt limit demands, the more economic uncertainty and harm
they'll cause for workers, families and businesses," Murray said at
a committee hearing.
Democrats aren't the only hurdle to using the debt limit to leverage
greater deficit reduction.
Republicans themselves have not yet been able to decide what to
attach, either in spending cuts or in job creation, to a debt limit
bill.
Several ideas have been floated, ranging from demanding Obama
administration approval of the construction of the Keystone XL oil
pipeline from Canada to altering the "risk corridor" provisions of
Obama's health insurance law, which protect insurers from certain
losses.
"When we have a decision, we'll let you know," Boehner said.
Senate Democratic leader Harry Reid quipped, "The last thing we need
is another manufactured crisis driven by the Tea Party-driven
Republicans."
House Budget Committee Chairman Paul Ryan, noting the rough waters
CBO sees long term if Congress ignores the high cost of retirement
and healthcare for an aging population, said, "Washington can't
continue to ignore the problem: trillions of dollars in empty
promises" that will saddle Washington in coming decades.
(Additional reporting by Susan Cornwell and Thomas Ferraro;
editing
by Leslie Adler)
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