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 Both House Republican leadership and some of the conservatives who
voted against the deal to end a government shutdown last October are
taking a more pragmatic approach that includes no talk of
brinkmanship. As a result, financial markets are far from panicking.
The conditions under discussion by Republicans were shrinking in
scale on Thursday after party leaders opted not to attach changes to
"Obamacare" insurance provisions nor approval of the Canada-to-Texas
Keystone XL oil pipeline.
Republican lawmakers and aides said possible debt limit conditions
still under discussion included the restoration of military pension
cuts that many Republicans had just supported in December, as well
as adjustments to doctor payment rates in the Medicare health care
program for the elderly.
These would be a far cry from Republicans' ambitious demands for
trillions of dollars in spending cuts in 2011 during a bitter debt
limit fight that brought the United States to the brink of default.
House Speaker John Boehner said no decisions had been made on
whether to attach any conditions to an increase in the $17 trillion
borrowing cap. But he repeated what has become a new mantra on the
issue: "We do not want to default on our debt and we're not going to
default on our debt."
It remained unclear how he will come up with conditions that
Democrats can accept or engineer House passage of the "clean"
increase sought by President Barack Obama.
"The Republicans have been negotiating with themselves, and the
demands keep getting smaller," said Jim Kessler, a co-founder of
Third Way, a centrist think tank in Washington. "They are trying to
find some face-saving gimmick rather than something with real
substance."
He said the Democrats who control the Senate are likely to reject
any substantial conditions and send back a straight increase,
putting Republicans in the position of capitulating or holding out
and risking market turmoil and a potential voter backlash in
November midterm elections.
Time is running short. A temporary extension of the debt limit
nominally expires on Friday and the Treasury has said it expects to
exhaust all remaining borrowing capacity by the end of February.
Expressing frustration at Boehner's indecision, Democratic Senator
Patty Murray on Thursday accused Republicans of "just throwing ideas
against the wall to see what sticks and creating more uncertainty."
Some Republican lawmakers have advocated sitting out this debt limit
round and allowing an increase to be passed with Democratic votes
only. Raul Labrador, an Idaho Republican backed by the conservative
Tea Party movement said that would be better than making some
half-hearted demands likely to fail.
"The Democrats can own it," said Labrador, who voted against the
shutdown deal, which also extended U.S. borrowing authority.
Such a move could be accomplished by a significant number of the
majority Republicans voting "present," which would exclude their
votes from the majority needed for passage.
Democrats would happily push a clean increase into passage, said
Representative Steny Hoyer, the No. 2 House Democrat, who said he
could easily deliver more than 180 "yes" votes towards a 218
majority.
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BACK IN THE (DEBT LIMIT) DAY
The 2011 budget fight is viewed by many Republicans as their finest
debt-limit hour because it led to the Budget Control Act, which cut
discretionary spending by about $2.1 trillion over 10 years,
including the painful, across-the-board cuts known as
"sequestration."
But the episode also cost the United States its top-tier credit
rating from Standard & Poor's and caused widespread financial market
turmoil as investors feared a first-ever default on U.S. debt.
Another debt limit increase that was needed in mid-October last year
was hijacked the government shutdown on October 1, a fight that was
waged over conservative demands to deny funds to President Barack
Obama's signature health insurance reform law.
Investors and the public conflated the two events, and Republicans
never got an opportunity to use the debt limit to make coherent
demands for deficit reduction.
The shutdown paved the way for a modest compromise to set spending
levels for government agencies and the military through September
2015, and the debt limit rhetoric has since cooled.
Financial markets are also somewhat more sanguine. Interest rates on
one-month Treasury bills are somewhat elevated, but not to the
extent they were last October.
And Moody's Investors Service said this week that failure to raise
the debt limit by March or April would not lead to a U.S. credit
downgrade because the government could more easily cut other
expenses to maintain debt payments.
Steven Hess, Moody's lead U.S. sovereign credit analyst said he
nonetheless expected Congress to pass a borrowing cap increase
"certainly during the month of February."
Some House conservatives who fought hard last year over the
government shutdown say they won't give up their desire to use the
debt limit to reduce deficits, but they are taking a more pragmatic
approach this year.
Representative Rob Woodall of Georgia said he doesn't think House
Republicans want to try to "bulldoze" their demands on Senate
Democrats and the White House.
"I don't think that's where folks are, I don't think we have the
votes to get that done," said Woodall, first elected in the Tea
Party wave of 2010. "What we're trying to do is coalesce around
something that the Senate would be an enthusiastic partner on."
Woodall voted against the deal last to end the October shutdown and
in 2011 declared that "the days of blindly increasing the debt limit
without spending cuts are over."
(Additional reporting by Susan Cornwell and Richard Cowan in
Washington and Luciana Lopez in New York; editing by Eric Walsh)
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