House Republicans are pressing ahead with a vote on a newly modified plan to stave off an unprecedented government default next week even though the legislation faces a White House veto threat and unanimous opposition among Senate Democrats.
As the House prepared to vote Thursday, investor worries that a dysfunctional Congress might remain gridlocked sent stocks plunging. The Dow Jones industrial average dropped almost 200 points Wednesday, on top of a 92-point drop the day before.
House Speaker John Boehner, R-Ohio, made headway with balky conservatives unhappy that the measure contains smaller spending cuts than a more stringent debt measure that passed the House last week. The new measure depends on caps on agency budgets to cut more than $900 billion from the deficit over the coming decade while permitting a commensurate increase in the nation’s borrowing to allow the government to pay its bills.
Boehner acknowledged that the measure was hardly perfect but represented “the best opportunity we have to hold the president’s feet to the fire. He wants a $2.4 trillion blank check that lets him continue his spending binge through the next election. This is the time to say no.” Boehner made the comments Wednesday to conservative radio host Laura Ingraham.
The White House threatened a veto, saying the bill did not meet President Barack Obama‘s demand for an increase in the debt limit large enough to prevent a rerun of the current crisis next year, in the heat of the 2012 election campaign.
Instead, Obama supports an alternative drafted by Senate Majority Leader Harry Reid, D-Nev., that contains comparable cuts to agency operating budgets but also claims savings from lowball estimates of war costs. Reid’s plan would provide a record-breaking $2.7 trillion in additional borrowing authority, enough to tide the government over through 2012. Reid, however, is plainly short of the votes needed to overcome a GOP filibuster.
While Boehner holds out hope that the Senate will pass his measure, a more likely outcome is a last-ditch effort to find a compromise.
In fact, Boehner’s plan has enough in common with Reid’s — including the establishment of a special congressional panel to recommend additional spending cuts this fall — that Reid hinted a compromise could be easy to snap together.
“Magic things can happen here in Congress in a very short period of time under the right circumstances,” Reid told reporters.
Unless Congress acts by Tuesday, administration officials say, the government will not be able to pay all its bills. They include $23 billion in Social Security benefits due Aug. 3, an $87 billion payment to investors to redeem maturing Treasury securities and more than $30 billion in interest payments that come due Aug. 15.
Treasury Secretary Timothy Geithner and other officials warn that a default could prove catastrophic for an economy still recovering from the worst recession in decades. But some skeptics, including conservative Republicans like Sen. Pat Toomey of Pennsylvania, say Geithner can manage Treasury’s cash flow to avoid a catastrophe if Congress fails to act.
House Republicans tweaked their measure Wednesday to enhance its prospects of passage after a worse-than expected cost estimate from congressional budget analysts on Tuesday. The changes were modest, but under arcane budget conventions, they brought projected savings for 2012 to $22 billion, part of a 10-year cut of $917 billion. That would trigger a $900 billion increase in the debt limit.
While the Boehner and Reid measures differed in key details, they also shared similarities that underscored the concessions made by the two sides in recent days. Reid’s bill does not envision a tax increase to reduce deficits, a bow to Republicans. But neither does the House measure require passage of a constitutional balanced budget amendment for state ratification, a step in the direction of Obama and the Democrats.
For Boehner, the vote shaped up as a critical test of his ability to lead a fractious majority that includes 87 first-term lawmakers, many of them elected with tea party support. Passage also was imperative to maximize Boehner’s leverage with Obama and Reid in a fast-approaching endgame.
Boehner showed fire in a meeting Wednesday with the Republican caucus.
“Get your ass in line,” Boehner told the rank and file. “I can’t do this job unless you’re behind me.”
If House conservatives torpedo the bill, any follow-up probably would require Democratic votes to pass. That, in turn, would mean smaller spending cuts than Republicans are seeking in exchange for raising the nation’s $14.3 trillion debt limit.