Will a short-term extension of the government’s ability to borrow money help the US (and the world) to avoid an economic crisis? That’s the big question in Washington today following House Speaker John Boehner’s announcement that the GOP leadership will offer a temporary debt ceiling increase in exchange for a commitment to a budget conference from President Obama and Senate Democrats.
“This is a good faith effort on our part to move halfway to what [Mr. Obama’s] demanded,” said Mr. Boehner at a press conference following a House Republican caucus meeting.
To be clear, this move would not reopen the government. It’s about the second part of the rolling Washington political crisis, the debt limit. If this limit isn’t raised by Oct. 17, the government will run out of cash to pay debts it has already incurred, such as Treasury bill redemptions and perhaps even Medicare obligations, said Secretary of the Treasury Jack Lew at a Thursday Senate hearing.
“There is no way of knowing the irrevocable damage such an approach would have on our economy and financial markets,” said Lew.
The House GOP’s offer is an attempt to avoid this situation, for now. Financial markets appeared to react well to the move, with the Dow Jones Average rising sharply Thursday morning.
But Boehner’s announcement left a number of important questions unanswered. It is possible that this plan could fall apart, as have previous Boehner plans to avoid or deal with the government shutdown.
Are there strings attached? For example, it’s not entirely clear if this is a “clean” debt limit increase, with no extra provisions. Will the GOP’s call for a budget conference be written in the legislation? Or would a simply “yes” on the conference from the White House be sufficient for Boehner to push the bill forward?
Will the White House reject this? The nature of the linkage here is important because Obama has made it clear he won’t accept any increase in the debt limit with conditions. He has said, however, that he’d talk about the budget and other issues after the debt limit and government shutdown problems are resolved. There’s space there for some creative aides to figure out how to sequence events in a manner that might make both sides happy.
But what about the shutdown? That’s a second part of the Obama question. As noted above, the president has said both problems must be solved before he agrees to talks. In Boehner’s debt-ceiling framework, the shutdown continues.
In response to Boehner’s press conference, the White House issued a statement Thursday morning which appeared to reiterate that they won’t move unless Congress raises the debt ceiling and passes a clean funding bill to reopen government.
“Once Republicans in Congress act to remove the threat of default and end this harmful government shutdown, the President will be willing to negotiate on a broader budget agreement,” were the statement’s exact words in this regard.
Will the tea party support this? Boehner did not get an enthusiastic response to this proposal from his caucus at Thursday’s meeting, according to numerous press reports.
“House GOP seems split,” tweeted the National Review’s Robert Costa at one point while the conference was ongoing.
Many tea party conservatives seemed to see this as a cave on Boehner’s part. If enough of them refuse to support their speaker, it’s possible that the GOP leadership will have to depend on Democratic votes to pass the bill – and those Democratic votes may, or may not, be forthcoming.
But some conservative groups outside Congress said they would support a clean debt limit increase. Their reasoning runs like this: the debt-limit breach is a possible scary thing and needs to be separated from the government shutdown, which has already occurred. That way the shutdown can be used as continuing leverage to dry and defund or make major changes to Obamacare.
One of the worst fears of these groups is that the GOP will try and strike a grand bargain on taxes and entitlement spending that does nothing to the Affordable Care Act, the issue over which the government was shut down in the first place.
“I think that we would give the speaker some flexibility on a short term debt limit increase to keep the focus where it should be, which is about Obamacare. But any CR [‘continuing resolution’ or stopgap government funding measure] that does not address Obamacare is something that we would be very strongly against,” said Michael Needham, CEO of the conservative group Heritage Action for America, at a Christian Science Monitor-sponsored breakfast for reporters on Thursday.
And then there is perhaps the biggest question of all: If this does manage to pass, what happens in six weeks, when it expires? It is possible a short-term debt hike would just push the current disagreements into the heart of the holiday season.