Collision Course: CR And Debt Ceiling

October 2, 2013
Politico
Manu Raju, Jake Sherman and Carrie Budoff Brown

A harsh reality began setting into Capitol Hill on Tuesday: The U.S. government may not reopen until the two parties reach a deal to raise the national debt ceiling.

Hours after federal agencies shuttered their doors for the first time in nearly two decades, congressional leaders from both parties began to prepare for a protracted budget battle bound to grow more difficult the longer it goes unresolved.

Indeed, if the standoff continues to creep toward the Oct. 17 deadline to raise the $16.7 trillion national debt ceiling, the two issues will become intertwined — and potentially intractable. House Republican leaders and top Senate Democrats privately began discussing this increasingly likely possibility Tuesday, but the two sides have yet to engage in any direct negotiations in the acrimonious budget dispute.

That means a federal shutdown — which has suspended government services across the country and prompted furloughs of hundreds of thousands of federal workers — could persist for weeks until Congress and the White House cut a deal to avoid a first-ever default on the national debt.

“This is now all together,” Senate Majority Whip Dick Durbin (D-Ill.) said of the debt limit and the continuing resolution to keep the government funded.

Within the next few days, if House Republicans don’t accept a Senate plan to open the government until mid-November, Reid is highly unlikely to accept a budget deal if it does not increase the debt ceiling, Democratic sources said Tuesday. If the House GOP won’t back the Senate’s stopgap plan by later this week, Democrats are prepared to argue that it makes little sense to agree to a short-term spending bill if Congress is forced to resolve another fiscal crisis in just a matter of days.

A White House official said Tuesday night that the president could get behind Reid’s strategy.

Across the Capitol, House Republicans were quickly coming to a similar conclusion. Republicans were internally weighing including a debt ceiling hike in their demands to convene a House-Senate conference committee to discuss a bill to reopen the government. In the coming days, the GOP leadership is likely to change its rhetoric, with Republicans arguing about government funding and the debt ceiling in the same breath.

Even if the issues become connected, administration officials said it won’t change the underlying dynamics of the president’s position — that he won’t negotiate over the debt limit.

At the White House, there was also little indication of any movement, though there were some signs that at least the two sides may talk. President Barack Obama may begin to at least make phone calls over the budget impasse with Republican and Democratic leaders this week with a White House meeting possible, sources said Tuesday afternoon.

Still, the reason for such a move may simply be for optics: Obama is aligning himself closely with Senate Majority Leader Harry Reid’s hardball demands that Republicans must cave or risk the public backlash. The demand: Republicans must agree to both a “clean” budget bill to reopen the government and a debt ceiling hike with no strings attached — a position senior White House aides reiterated to Senate Democratic leaders at a private meeting Tuesday morning.

The change in the legislative dynamics puts Washington in a deeply uncertain course to resolve what could become a full-blown economic calamity, with both sides betting the other will blink once the political ramifications intensify.

For the past two weeks, Republicans have been insisting that any budget bill must include provisions to gut or delay Obama’s signature health care law, a position rejected time and again by Senate Democrats and the White House. And after being rebuffed on their request for formal negotiations with the Senate, Republicans tried a different tactic Tuesday: attempt to pass bills funding individual government agencies and dare Democrats to block them. The White House vowed to veto such piecemeal measures.

Indeed, on Capitol Hill there were signs only of the two sides digging into their respective corners, with the House Republican Conference having what several sources described as their best conference in months after Speaker John Boehner’s demands to gut Obamacare prompted the budget impasse. And at a private Democratic lunch in the Senate’s ornate Mansfield Room, speaker after speaker heaped praised on Reid for his no-compromise stand, attendees said.

And increasingly, the two policy disputes — raising the debt ceiling and keeping the government funded in the new fiscal year — seemed bound to become tied together.

“It will all get solved at one time,” said Sen. Tom Coburn (R-Okla.).

But on the continuing resolution the two sides are much closer than they are on resolving the debt ceiling. They have agreed on the level of spending — $986 billion — and are generally on the same page over the time frame. The dispute simply rests on whether to use the CR to change the health care law, which a number of Republicans flatly concede won’t happen with Obama in office.

On the debt ceiling, the two sides are much further apart. The White House says Republicans must agree to increase the borrowing limit and drop any extraneous demands in order to avoid the possibility of a debt default. Republicans scoff at that idea, saying they would raise the debt ceiling only with deep spending cuts or if the White House agrees to a hodgepodge of conservative policy ideas.

With polls showing the public blaming them more than Democrats for the shutdown, Republicans argued they would be on firmer political ground if they shift the fight to the debt ceiling.

“What we will have going for us in the debt ceiling is 60 percent of the people behind us instead of 70 percent of the people against us,” Sen. Lindsey Graham (R-S.C.) said, adding Republicans would be on “totally” firmer ground than they are now.

Still, if Republicans shoulder the blame of the shutdown, some in the GOP believe they could be in a weaker negotiating position over the debt ceiling and will be forced into an even greater capitulation.

“I think it’s harder now than it would have been before,” said Arizona Sen. Jeff Flake. “It certainly doesn’t help to resolve it together.”

For the White House, which has said it won’t negotiate over the debt ceiling, the lines could get blurry.

Obama has said he is willing to use the CR as a vehicle for negotiating a deal to address the country’s long-term fiscal issues. And just as he tried to do during the last round of deficit-reduction talks with Boehner last December, he could support tacking on the debt-limit increase, but it can’t come at a price.

“The timing of a debt limit vote in Congress doesn’t affect the underlying dynamics of the debate,” a White House official said. “The White House continues to believe that Congress must raise the debt limit without drama, without delay and, of course, without ransoming the full faith and credit of the United States of America.”

Given the deep political divide over how to deal with the country’s long-term deficits — Democrats need new tax revenues, which Republicans refuse to agree to — a fiscal deal is a long shot.

And as long as Republicans insist on changes to Obamacare as a condition for renewing government funding or raising the debt limit, Obama doesn’t see any reason to back off his hard-line position, White House officials said.

So the White House plan is essentially to wait out the Republicans and hope that they feel the pressure to pass a clean funding bill sooner rather than later.

“We don’t have control here over what the House leadership does even though we wish we did,” White House press secretary Jay Carney said. “So it is up to the House leadership to do the right thing.”

In closed meetings of the House Republican leadership, top players have been internally debating the merits of tying the government funding bill to the debt ceiling discussions.

Boehner and his leadership team have long thought that they are better off if more issues are melded together. If a shutdown persists into next week — a very likely possibility at this point — Boehner will have to allow the two debates to become one. The House will need two weeks to get its act together to raise the debt ceiling — it already has failed last month to get votes to lift the borrowing limit for a bill heavy on conservative policy ideas.

While the White House and Democrats eagerly highlight each Republican who mentions their desire for a clean CR — there are fewer than 20 — GOP leaders believe they are weathering the shutdown so far. Several sources described Tuesday’s House Republican Conference meeting as one of the best and most unified in some time. In short, Republicans are feeling absolutely no pressure to reopen government at this point.

There’s also a parallel set of considerations: If Boehner caves, he could lose his job by prompting a rebellion of House conservatives. To preserve his internal political capital, Boehner would be very hard-pressed to pass a clean CR. In fact, the Ohio Republican hasn’t even mentioned it in closed meetings since the party’s original government-funding bill had to be pulled several weeks ago, sources said.

But melding the two issues creates its own challenges. Conservatives won’t relent on their desire to curb Obamacare, and many House Republicans won’t be satisfied unless there are some structural budgetary changes.

Key players across the conference see a large-scale fiscal debate as a likelihood, at this point.

“Well, it remains to be seen, but it’s only two weeks away,” Appropriations Committee Chairman Hal Rogers (R-Ky.) said when asked about the two debates melding together.

Republican Study Conference Chairman Steve Scalise of Louisiana said, “It may force itself there if Harry Reid is going to refuse to negotiate at all.”

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