The Wall Street Journal
By: Carol E. Lee, Damian Paletta & Naftali Bendavid
July 13, 2011
McConnell Breaks GOP Ranks, Says the President Should Be Given Authority to Raise the Borrowing Limit on His Own.
Negotiations over a deficit-reduction agreement spiraled downward Tuesday as the White House and congressional leaders dug in even as anxiety mounted that they could wait too long to reach a deal to avoid a government default.
.In one sign that top leaders worry they won't reach a deal in time, Senate Minority Leader Mitch McConnell (R., Ky.) unveiled a proposal that would allow President Barack Obama to raise on his own the federal borrowing limit by $2.4 trillion in three installments before the end of 2012, unless two-thirds of Congress votes to block it.
Because Mr. Obama would have to lift the debt ceiling, it could place any political fallout on him for doing so. But Republican conservatives protested that Mr. McConnell's plan would give up the leverage the GOP has to force the White House to approve government spending cuts in return for a debt-ceiling increase.
The Treasury says the $14.29 trillion debt cap must be raised by Aug. 2 or the government will run out of cash to pay all its bills. Mr. Obama warned in an interview with CBS News that he could not guarantee that the government would be able to send checks to recipients of Social Security, military pensions and other government benefits next month without a debt-ceiling increase. "There may simply not be the money in the coffers to do it," he said.
Taken together, the developments of the past few days suggest that the collapse of the effort by Mr. Obama and House Speaker John Boehner (R., Ohio) to strike a bigger and more historic deficit-cutting deal has made the effort to negotiate a smaller agreement harder rather than easier.
House Republicans met privately on Capitol Hill before their leaders went to the White House for another round of deficit-reduction negotiations and the resounding consensus of the members was "we've got to stand our ground" against accepting any tax increases in an agreement and to keep pushing for more than $2 trillion in deficit reduction over 10 years, said one Republican who attended.
At the White House meeting, the president and congressional leaders focused on finding areas of potential agreement on potential spending cuts, according to a Democratic official familiar with the meeting. The goal of Wednesday's meeting, the official said, would be to go line by line through all of the spending cuts that were identified in the negotiations led until last month by Vice President Joe Biden.
House Majority Leader Eric Cantor (R., Va.) suggested they consider temporarily lowering corporate tax rates as a way to offset revenue increases from closing tax loopholes, a Republican familiar with the discussion said. Democrats rejected this proposal, this person said, but suggested an extension of the payroll tax break for employees.
Mr. McConnell's proposal to allow the president to raise the debt ceiling came after he said in a Senate speech that the country cannot solve its fiscal problems with Mr. Obama as president. "After years of discussions and months of negotiations, I have little question that as long as this president is in the Oval Office, a real solution is unattainable," he said.
White House press secretary Jay Carney fired back, "This president is going to be in office for at least another 18 months, and I think the American people expect this Congress to work with him."
Under Mr. McConnell's plan, Congress would pass legislation authorizing the president to request a total $2.5 trillion debt-limit increase in three stages--$700 billion by Aug. 2 followed later in the year by two $900 billion installments. The increases could take effect without congressional approval, but Congress could block it with a resolution of disapproval. It would take a two-thirds majority in both the House and Senate to override a veto.
The bill also would require Mr. Obama to spell out spending cuts equal to the debt limit increases he requested, but Congress would not have to approve such spending cuts for the debt limit hike to take effect.
Such a complex plan is unlikely to pass anytime soon. Senate Majority Leader Harry Reid (D., Nev.) said he did not want to "trash" Mr. McConnell's proposal, but said that he needs to study it.
Meanwhile, some 470 executives--including the chief executives from Alcoa Inc., DuPont, Citigroup Inc. and Procter & Gamble Co.--released a letter to the president and Congress urging them to raise the debt ceiling.
The executives warned that a government default could throw financial markets into "disarray" and "this is a risk our country must not take."
The letter came after the U.S. Chamber of Commerce, National Association of Manufacturers, and Financial Services Forum have spent months in briefings with lawmakers warning about default. In some of those meetings, officials said that if the U.S. government's bond rating were downgraded from Aaa to Aa, it could shave 1% off the gross domestic product and cost at least one million jobs. "Now is the time for our political leaders to act," the executives wrote.
Treasury officials have said the government would only be able to spend the money it brings in each day through revenue if the debt ceiling isn't increased. The government is scheduled to pay $23 billion in Social Security benefits on Aug. 3, and it is only expected to bring in $12 billion that day in tax revenue, according to the Bipartisan Policy Center.
Another emerging complication is a growing insistence by some Republicans that Congress pass a balanced-budget amendment to the Constitution before a vote to increase the debt limit. The House is expected to vote on such an amendment next week, and Senate Republicans may force a vote in their chamber as well.
Mr. Boehner said in an interview Fox News that he had raised the possibility with Mr. Obama of attaching an increase in the debt ceiling to a constitutional amendment requiring the federal government to balance its budget, indicating this could be a way to win greater Republican support for the increase in the statutory borrowing limit.
Democrats say a balanced-budget amendment is a political sideshow that's unlikely to pass, especially because the GOP version requires super-majorities in Congress for raising taxes or spending.
--Janet Hook contributed to this article.
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