WASHINGTON (CBSMiami) – The United States is about to hit its Congressionally mandated debt ceiling and the standoff between Congressional Republicans and the White House is threatening to send the global economy into chaos.
Some Congressional Republicans have vowed to take the debt ceiling hostage and refuse to raise the debt ceiling limit without major cuts to domestic spending, including entitlements like Social Security and Medicare.
The White House said it will not negotiate over the debt limit and will not agree to spending cuts. The White House has said previously the debt limit is Congress’ responsibility for bills it’s already incurred in the past.
Congressional Republicans put together a similar plan the last time the debt ceiling needed to be raised. After refusing to raise the limit without spending cuts, the nation’s credit rating was cut for the first time in history and only after the White House relented to more than $1 trillion in cuts did the debt limit get raised.
But this time may prove to be different. The biggest question Congressional Republicans have to answer is are they willing to send the nation into default and risk global economic catastrophe to secure some spending cuts?
“No one wants to default, but we are not going to continue to give the president a limitless credit card,’ Representative Jason Chaffetz (R-Utah) told Politico.com.
Politico reported that Speaker of the House John Boehner (R-Ohio) is planning to meet with the entire GOP conference this weekend to explain exactly what will happen if the country defaults on its debt. Speaker Boehner is also expected to reveal his plans for cuts without any tax hikes.
“It is more likely you default than you raise any taxes,” a senior GOP aide told Politico.com.
The problem for Boehner is the majority of his Republican caucus is loathe to cutting any deal with President Barack Obama for any reason. That puts him in a difficult position because he has previously said that a default of the debt would equal “financial disaster.”
In addition, some Republicans like Newt Gingrich the conservative editorial board of the Wall Street Journal have warned Congressional Republicans that failing to raise the debt ceiling could be political suicide for the Republican Party.
Unlike in 2011, the last time the debt ceiling was an issue, President Obama isn’t running for re-election and can take a more determined stance against Congress. Republicans in Congress have to run for re-election in just two years, making the political calculations for both sides even more important.
Republicans want a $1-for-$1 deal with the debt ceiling that will cut $1 for every $1 the debt ceiling is raised. In addition, many GOP members are pushing for the sequester, a series of spending cuts to the defense department and domestic spending totaling $1.2 trillion to go ahead.
The defense industry has warned of massive layoffs if the sequester is allowed to move forward. Social programs to help the needy would also be crippled with massive cuts included in the sequester.
The $2.2 trillion in cuts sought by the GOP would continue to impose austerity on the fragile economic recovery the U.S. is in currently. As Europeans have learned, austerity in the face of lagging unemployment and slow growth has led to even deeper recessions across the eurozone.