July 19, 2011 in Nation/World

Posturing precedes a deal on U.S. debt

GOP expected to push doomed balanced- budget plan to a vote
James Oliphant Tribune Washington bureau
 
Background

Q. What is the debt ceiling?

A. It’s a legal limit on how much debt the government can accumulate. The government takes on debt two ways: It borrows money from investors by issuing Treasury bonds, and it borrows from itself, mostly from the Social Security trust fund, which comes from payroll taxes. Congress created the debt limit in 1917. It’s unique to the United States. Most countries let their debts rise automatically when government spending outpaces tax revenue. Congress has increased the debt limit 10 times since 2001.

Q. What is the federal deficit, and how does it differ from the debt?

A. The deficit is how much government spending exceeds tax revenue during a year. Last year, the deficit was $1.29 trillion. The debt is the sum of deficits past and present. Right now, the national debt totals $14.3 trillion – a ceiling set in 2010.

Also today: Read how failure to raise the debt ceiling could have a major effect on the financial markets/ A8

WASHINGTON – With the deadline swiftly approaching for a deal to resolve the debt-ceiling crisis, the volume on Capitol Hill is about to be cranked up to “11.”

House Republicans are pushing ahead with votes this week on a proposal backed by chamber conservatives that would raise the debt ceiling the required $2.4 trillion but would ultimately cap government spending at 18 percent of the nation’s gross domestic product, require Congress to pass a balanced budget each year and slash more than $110 billion from the 2012 fiscal year budget.

The measure, which may pass the House by a majority vote but is expected to go nowhere after that, is either a final, defiant – albeit symbolic – stand by House Republicans before acceding to a compromise on the debt ceiling or a formal show of intransigence that illustrates how difficult it will be for the House to sign off on any deal that includes President Barack Obama’s signature.

The White House Monday wasted no time twisting the dial, with the president threatening to veto the House bill, even though there’s little chance it can pass the Senate.

At any rate, it appears that with the Aug. 2 deadline for a debt-limit increase looming, things will slow down for a bit before they speed up. Republican leaders in the House and Senate have indicated that they want to fold in time for a floor debate in order to mollify conservatives on both ends of the Capitol, who are certain to squawk long and hard about any final deal that does not include the kind of significant spending cuts they seek.

That doesn’t mean both sides have stopped talking. Senate leaders are working on a budget proposal that would cut $1.5 trillion, while other reports have House Speaker John Boehner and the White House still working on some version of the “grand bargain” that could wipe out $4 trillion from the budget over the next decade but would also likely include some elements of entitlement-program reform as well as a some accord on modifying the tax code.

Then there is the in-case-of-emergency-break-glass option that was floated by Senate Minority Leader Mitch McConnell last week, which involves a dose of procedural flim-flammery that would provide the White House with a debt-ceiling increase to stave off economic calamity while handing the GOP political cover by voting against the increases.

But the attention, at least for the next couple of days, will fall on the House. The proposal being offered would force federal spending to fall below 20 percent of GDP by 2021, which would require massive spending cuts, likely including the Pentagon or entitlement programs or both. (Federal spending currently accounts for about one-quarter of GDP.)

It would also require Congress to pass a budget matching revenues with outlays. Because that would require altering the Constitution, the proposal would need the vote of two-thirds of both chambers. Those votes don’t exist in the Senate. Such a constitutional amendment would then require ratification by three-fourths of the states.

Although the vote will serve as an attempt to assuage House conservatives (and perhaps show them the limits of the support on the Hill for their proposals), Democratic groups are eager to use it to reinforce their running claims that the GOP is out to radically alter Medicare, a message many feared was growing muddled as Obama last week showed some willingness to also consider changes to the popular program.

“Let’s let the American people decide,” Rep. Jim Jordan of Ohio, the head of the Republican Study Committee, a House GOP policy arm, said on “Fox News Sunday.” “Do they want something common sense as cutting spending, capping the growth in government and requiring a balanced budget amendment to the Constitution?”

The American people, however, seem to be registering their disapproval with the GOP, according to a new CBS poll that showed just 21 percent of those surveyed approved of Republicans’ handling of the debt-limit crisis, compared with 43 percent approving of Obama’s stance.

Eric Cantor, the House majority leader and a key figure in the debt talks, made clear in an Op-Ed article Monday in his hometown paper in Richmond, Va., that he’s solidly behind the plan, which has support from tea party-backed freshmen legislators.


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