Washington Prepares For Next Fiscal Fight
WASHINGTON (CBSMiami) – The smoke has barely cleared from the prolonged fight over the fiscal cliff on Capitol Hill, but already Congressional leaders and the White House are drawing lines in the sand over the debt ceiling.
The federal government hit its statutory debt limit on New Year’s Eve and the Treasury Department will take extraordinary measures to keep the government from defaulting. The measures will last upwards of two months, meaning Congress has to raise the debt ceiling before then.
Otherwise, the United States of America will default on its debt. The 113th Congress begins its legislative session on Friday:
The fight has played out between both sides during the 112th Congress. In 2011, Republicans in the House of Representatives pushed the government to default as they demanded spending cuts before they would raise the debt ceiling.
A deal was eventually reached in 2011, but Republicans paid a hefty political price for their stance and willingness to push the U.S. into default. Republicans have also shouldered the blame for the fiscal cliff problems the country just went through for an unwillingness to raise taxes.
If the U.S. defaulted on its debt, it could trigger a global economic crisis not seen since the crash of Lehman Brothers and other banks in 2008. The U.S. has never officially defaulted on its debt.
That sets the stage for the coming debt ceiling fight near the end of February, when the Treasury Department can no longer take any measures to stave off default.
President Barack Obama has said repeatedly that he will not negotiate with Congressional Republicans over the debt ceiling. President Obama said if Republicans were demanding massive spending cuts to discretionary spending and entitlements; he expects more tax revenues through tax reform.
Republican Senate Minority Leader Mitch McConnell said the fiscal cliff tax deal was the last word on taxes and Republicans would not agree to any more tax hikes for any reason, according to talkingpointsmemo.com.
Congressional Republicans see the debt ceiling as a form of revenge against President Obama and Democrats for having to swallow the tax increases included in the fiscal cliff deal. Republicans said the debt ceiling is the only leverage they have to force spending cuts through the government, according to the Washington Post.
What has yet to be defined by Congressional Republicans is exactly what spending cuts they are looking for in a possible debt ceiling agreement. The House has proposed cuts to Social Security and Medicare in the past and President Obama pitched a chained CPI index to help cut Social Security costs during the fiscal cliff debate.
But the debt ceiling is only one prong of another looming fiscal crisis. As part of the fiscal cliff deal passed by Congress, leaders pushed off the sequester for two months, or roughly the beginning of March.
The sequester would force deep spending cuts to both discretionary spending and military spending. Military leaders and defense contractors warned this could lead to large layoffs in the military industrial complex. Currently, the U.S. spends more on defense than any country by huge margins.
However, some Republicans and Democrats have said the defense cuts must be avoided at all costs, but the cuts to discretionary spending, which typically involve aid to the poor and other programs, can go forward.
The question on the debt ceiling is whether Republicans in the House are ready to drive the country into default? Democrats and the President believe, in the end, Republicans will not sacrifice the global economy for this fight.