As negotiators reconvened at the White House on Wednesday for another round of debt talks, House Republicans appeared to dig in even deeper in their resistance to any sort of deal to raise the federal debt ceiling even as one party leader foretold disaster for the GOP if its members failed to act.
Mitch McConnell, the Senate minority leader who has proposed a fallback plan that would likely ensure the $14.3-trillion debt limit would be raised, said in a radio interview that a default by the United States could critically damage his party heading into the 2012 elections.
A default, McConnell told talk show host Laura Ingraham, “destroys your brand.”
The Kentucky senator said the economic consequences of a default would give President Obama an opportunity to blame the GOP for the country’s economic straits. “Look, he owns the economy,” McConnell said. “He’s been in office for three years. We refuse to let him entice him into co-ownership of a bad economy.”
McConnell said that at this point the GOP had two choices: Either make a bad deal — from their perspective — with Obama or take the country into default, which, McConnell suggested would do even more damage to the party. He compared the situation to 1995, when the GOP forced a government shutdown.
“We know that’s going to happen. Just like we knew shutting down the government in 1995 was not going to work for us,” he said. “It helped Bill Clinton get reelected. I refuse to help Barack Obama get reelected.”
Across the Capitol, House Speaker John Boehner (R-Ohio) sounded his own kind of alarm, saying that a default would take the country into uncharted territory.
"Nobody wants to go there, because nobody knows what's going to happen. It's a crapshoot," Boehner told reporters.
The Financial Services Roundtable, a key trade group, sent a letter to members of Congress on Wednesday afternoon urging them to come to an agreement quickly.
“At this juncture in our economic history, this uncertainty is potentially devastating to a sustained economic recovery,” wrote Steve Bartlett, the organization’s president and chief executive officer.
In an interview Tuesday, Obama warned that if Aug. 2 passes without an agreement, the U.S. Treasury may start to have to pay its creditors first, meaning that Social Security recipients could go without checks.
McConnell conceded that possibility in the radio interview, along with military families going without paychecks.
But Boehner reiterated that nothing Obama had suggested could win approval in the House, which has a significant bloc of tea party conservatives who don’t want to raise the debt limit under any circumstances and may be willing to gamble with the consequences of a default, along with bands of other conservatives who will accede to an increase only if it is accompanied by massive spending cuts.
"I’ve been here long enough that I’ve seen a lot of smoke and mirrors but I haven’t been here long enough to forget who I serve or where I come from,” Rep. Michele Bachmann (R-Minn.), a presidential candidate who opposes raising the debt limit, said at a news conference Wednesday. “And again all I can reiterate is that people across America are saying the spending is what has to be addressed, it’s too much, it’s got to be limited.”
House Majority Leader Eric Cantor (R-Va.) laid out the GOP position Wednesday, saying that for his caucus to get on board Obama would have to agree to reforms in entitlement spending along with offsets for the debt increase itself, a position the White House would be unlikely to accept. Obama has indicated he would consider some changes to entitlement programs if Republicans would modify their firm opposition to closing tax loopholes in a bid to raise more government revenue. The GOP has not budged from that position.
“I believe the path forward is to focus on what we can agree upon, and though it doesn’t go as far as our budget, House Republicans can likely agree with the general spending cuts and entitlement changes in the ‘big deal’ proposed by the president,” Cantor said in a statement.
McConnell’s plan appears to deal with the frank reality confronting both sides — that there may, indeed, be no way to bridge the gap. His plan would require Obama to request a debt limit increase from Congress in three separate stages, which would be granted unless Congress passed a “measure of disapproval.” If it did so, Obama could then veto the measure and the increases would be approved.
The advantage of the plan from a political perspective is that it would allow every Republican on Capitol Hill to vote against the increase without a risk of default. The downside: the massive spending cuts the House seeks likely wouldn’t be enacted.
But McConnell, noting that the GOP controls just one-third of the government, cannot force those spending cuts anyway. And that given that, a default can’t be the only other option.
“Doing the right thing for the country is our first obligation,” he said. “When we cannot force a result, we need to the next best thing and that’s clarify the differences between the parties.”
McConnell’s scheme has been cautiously embraced by some on both the right and left as a way out of the predicament the government has found itself in. The Wall Street Journal editorial board endorsed it Wednesday, adopting much of McConnell’s logic.
“The reality is that Mr. Obama is trying to present Republicans with a Hobson's choice: Either repudiate their campaign pledge by raising taxes, or take the blame for any economic turmoil and government shutdown as the U.S. nears a debt default,” the board wrote. “In the former case Mr. Obama takes the tax issue off the table and demoralizes the tea party for 2012, and in the latter he makes Republicans share the blame for 9.2% unemployment.”