Debt ceiling deal falling through
A big debt ceiling deal with trillions of dollars in spending cuts cannot happen, because the two sides are at an impasse.
What was the holdup?
The Los Angeles Times carried this story from Lisa Mascaro of the Tribune Washington Bureau. Representative John Boehner (R-OH), Speaker of the House, said today that he cannot make a big deal with the White House. The reason: President Obama insists on raising taxes. Boehner then said that he had called the President and suggested that Obama, Boehner, and the other leaders try to make a much smaller deal.
The two sides had talked of cutting $4 trillion from the deficit over ten years. Now, that talk is off.
Despite good-faith efforts to find common ground, the White House will not pursue a bigger debt reduction agreement without tax hikes. I believe the best approach may be to focus on producing a smaller measure, based on the cuts identified in the Biden-led negotiations, that still meets our call for spending reforms and cuts greater than the amount of any debt limit increase.
Of course, Vice-President Biden could not reach an agreement. Rep. Eric Cantor (R-VA-7), the Republican Floor Leader, walked out of the talks, and for the same reason: all that the Democrats wanted to do was raise taxes.
The Democrats have said nothing so far.
What happens if the debt ceiling does not rise?
Enough revenue is flowing in to roll over any Treasury bills or notes that fall due, and to pay principal and interest. But the government will have no authority to borrow more money. Then the government will have to decide which programs are important, and which are not.
Ben Johnson at Floyd Reports said today that Republicans in the House talked of drawing up articles of impeachment. They did this after President Obama actually suggested that the 14th Amendment gave him full authority to keep borrowing as much money as he needed to keep all existing programs running. Then yesterday, the President and his advisers backed off from that kind of talk. Johnson suggested that the veiled threat to draw up articles of impeachment backed Obama down.
Any deal to raise the debt ceiling would need at least some Republican support. Many Republicans in the House are already on record against any such rise.
Featured image: a Weimar-era householder wheels a barrow full of nearly worthless Reichsbanknotes to the corner baker to buy a loaf of bread.
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