The Debt Ceiling Impasse

Welcome to Politics Bites, where every afternoon at It's A Free Country, we bring you the unmissable quotes from the morning's political conversations on WNYC. Today on the Brian Lehrer Show, Congressional Quarterly senior writer Joseph Schatz discusses the "impasse" reached between Congressional Republicans and the White House over the federal budget.

Just when it looked like agreement had been reached on the debt ceiling, negotiations hit another roadblock as Republicans and the White House sparred over taxes. House Majority Leader Eric Cantor (R-Va.) walked out of the talks on Thursday, saying that no negotiations can move forward and called upon the president to step in and “resolve” the tax issue. Schatz said the impasse was largely predictable.

What happened yesterday wasn’t entirely a surprise, though the timing of it was sort of dramatic.

The conflict is over the legal cap on the amount of money that the government can borrow, which is the debt ceiling. The government is approaching the ceiling, and current predictions are that we'll hit it by August 2. At that point, if Congress hasn’t raised the cap, the U.S. will risk a default. The U.S. has never defaulted before and there is fear that if it did it could spark another financial crisis.

Schatz said raising the debt ceiling routinely happens in Congress every few years, but this time it has been especially contentious due to the high number of anti-spending freshmen elected to the House. They have been demanding major spending cuts in exchange for a vote on the debt ceiling, so leaders in both parties have been trying to find a package of debt reduction measures that would secure them the votes they need to get the debt ceiling increase. The Democrats are demanding that the spending cuts must be accompanied by tax increases, so that revenue to fund programs isn’t lost entirely. 

If they’re being asked to give way on a lot of domestic spending programs that are dear to them and even make changes to Medicare and Medicaid, then Republicans have to come too the table and give way, at least on some sort of tax increases. That’s where things have been for a while and that’s where they still are.

Right now the debt limit is set at $14.3 trillion dollars, a cap that Schatz said we're already technically reached.

Treasury Secretary Geithner is juggling accounts right now, he’s maneuvering behind the scenes to keep a default from happening, but his estimate is that he can’t go further than August 2 in doing that.

The president has said he wanted to trim $400 billion off of projected security spending through 2023 while saving $770 billion in non-security spending in the same period.  Schatz said this is serving as something of a guideline for the reduction. 

His stance is a lot of the deficit reduction that he wants to see happen should also come from tax increases, should come from the revenue side of the budget.

House leadership is demanding that the size of the debt limit increase be matched or exceeded by spending cuts. 

If the president wants to increase the debt ceiling by $2.5 trillion, which is what it would take to get the government through 2012, passed the next election…to get the big money you have into get into entitlement programs or you have to get into defense spending or you have to get into tax increases.

Publicly the other Republicans are backing Cantor, but Schatz said privately they have disagreement.  

In reality, they are looking and [Senator Mitch] McConnell in particular is looking at the writing on the wall, looking at the fact that it will be really difficult to get a long term deal in the next month… and as a result on Sunday he floated the idea that if Congress can't reach a deal in the next month they could actually do a short term- two, three, four month — debt limit increase.

House leaders, however, do not want a short term deal because they don’t want to have to vote twice on the issue. Republicans are much more willing to come to a short term deal than the House leadership.

This is a toxic vote for a lot of folks, especially folks in the Tea Party. They don’t want to have to take this vote to increase the debt limit more than once.

The key thing is the deadline, and while some junior members of Congress have indicated that they think it might not be so bad if the deadline on the debt ceiling is extended, most of the senior members and Speaker of the House John Boehner have conceded that hitting the ceiling could cause major problems for the nation’s economic recovery.

Boehner really faces a choice in the coming months. As that clock ticks down to August 2, is he willing to play chicken, basically? Is he willing to risk that possibility of a default, or is he willing to strike a deal with Democrats?