China and Japan ratcheted up pressure on the US to avoid an unprecedented US default on its debt as Democrats and Republicans continued their stand-off over the budget in the second week of a US government shutdown…
In its first official reaction to the US political stalemate over the budget and looming debt ceiling deadline later this month, Beijing said “the clock is ticking” and urged politicians in Washington to “ensure the safety of the Chinese investments”.
Zhu Guangyao, vice-finance minister, told a media briefing that China has made clear its unease over the political impasse in Washington. In Japan, the Ministry of Finance is very worried about the potential impact on currency markets, according to a senior official. A US default could cause investors to dump the US dollar, which would sharply push up the value of the yen.
Speaker John Boehner may be trying to finalize a plan to raise the debt limit, but House conservatives are already skeptical of his efforts. In interviews, several of them tell me they’re unlikely to support any deal that may emerge.
“They may try to throw the kitchen sink at the debt limit, but I don’t think our conference will be amenable for settling for a collection of things after we’ve fought so hard,” says Representative Scott Garrett (R., N.J.). “If it doesn’t have a full delay or defund of Obamacare, I know I and many others will not be able to support whatever the leadership proposes. If it’s just a repeal of the medical-device tax, or chained CPI, that won’t be enough.”
Representative Paul Broun (R., Ga.) agrees, and says Boehner risks an internal rebellion if he decides to broker a compromise. “America is going to be destroyed by Obamacare, so whatever deal is put together must at least reschedule the implementation of Obamacare,” he says.
Not only do some conservatives say Oct. 17 is an artificial deadline—”Nobody thinks we’re going to default on Oct. 17th,” said Rep. Tim Huelskamp, R-Kan.—but they also are attempting to narrowly define what would constitute default.
In interviews with more than a dozen GOP lawmakers, the Republicans rejected the notion that Washington could default on its debt unless a borrowing increase is approved before Oct. 17. For the United States to actually default, these Republicans argue, the Treasury Department would have to stop paying interest on its debts—something GOP lawmakers claim is inconceivable…
“We’re not going to default; there is no default,” said Rep. Mick Mulvaney, R-S.C. “There’s an [Office of Management and Budget] directive from the 1980s, the last time we got fairly close to not raising the debt ceiling, that clearly lays out the process by which the Treasury secretary prioritizes interest payments. Tim Geithner understood that, because the last weekend in July of 2011 he was in New York City telling the primary dealers that we were not going to default on our debt.”
Mulvaney even went so far as to say Obama and White House officials have been dishonest when warning of default: “If the president wants to lie to the public, I can’t stop him.”
Remember, the last time you and I wanted the GOP to fight on the debt ceiling, the attacks from our own side were particularly vicious…
It is what Republican leaders want. They are hoping for us to be recalcitrant and angry over the debt ceiling increase. They want to appear to shove us off by raising it. They know they can’t fight us on Obamacare because the public hates Obamacare. But they know they can on the debt ceiling because of the specter of default.
So what should we do? I think somebody like Steve Scalise, who chairs the Republican Study Committee, needs to propose a short-term debt limit for a few weeks and attach to it the Full Faith and Credit Act that ensures the Treasury Department prioritizes interest payments in the event the debt limit is ever not increased. This would buy us some time to finish the fight to defund Obamacare and set us up well to fight the next long-term debt limit increase to the death by removing some of the President’s scare tactics. How do Republican Leaders not adopt and push such a proposal? How does Obama not accept it without looking completely unreasonable?
Same folks ridiculing ACA website screw ups, now blithely asserting Treasury can pull off unprecedented management of payment priorities
— Chris Hayes (@chrislhayes) October 7, 2013
David Walker, the former Comptroller General under President Bill Clinton, who also served under President George W. Bush, says emphatically that the United States should not violate the debt ceiling limit, but he agrees with Republicans that the United States could and should prioritize making interest payments and bond redemptions ahead of other obligations. But, Walker says, the Treasury Department is either unable or unwilling to do that.
“In theory you could prioritize your payments. And in theory, if your accounting system were adequate, you could use whatever cash you have to be able to pay interest on the debt as a top priority,” Walker says. “The problem is that the federal government’s accounting systems are so bad that they don’t have enough transparency to be able to differentiate the payments.”
President Obama’s top economic adviser today suggested that negotiating with Republicans over an increase to the nation’s debt limit could be more harmful to the U.S. economy than default itself.
“If you sanction through negotiation the legitimacy of somebody threatening default, then that is going to happen over and over again,” National Economic Council director Gene Sperling told ABC’s Jonathan Karl at a Politico Playbook breakfast this morning.
“So sanctioning negotiations with someone threatening default is not going to end the risk of default; it’s likely to increase the chances that we as a country eventually default. The only way for us to go forward is to all make clear the era of threatening default is over,” he added.
Opinion about raising the debt limit was more evenly divided in July 2011, a few weeks before the last major showdown over the issue. At that time, 40% viewed a debt limit increase as absolutely essential in order to avoid a crisis, while nearly as many (39%) said it would not pose major problems.
Partisan differences over raising the debt limit are similar to two years ago: 62% of Democrats think it is absolutely essential to increase the debt limit, compared with 45% of independents and 36% of Republicans. Republicans and GOP leaners who do not agree with the Tea Party (40%) are much more likely than Tea Party Republicans (23%) to view a debt limit hike as absolutely essential.
Senate Democrats are planning to start the process this week for a Senate vote on a clean debt limit increase, sources tell me – a move that could call the bluff of Republicans in both chambers and force them to take a stand on whether they will allow default and economic destruction if Dems don’t accept their unilateral demands.
The move has the backing of the White House, according to a source familiar with discussions…
If the Senate can pass a clean debt limit increase and send it to the lower chamber, then House Republicans would then presumably refuse to allow a vote on it. With Boehner now claiming a clean debt limit (or a clean CR) cannot pass the House, this would enable Dems to argue Boehner won’t even allow the will of the House to be tested on the debt limit, either, despite the threat of default.
This also raises another question: If Senate Republicans filibuster a debt ceiling hike, will Senate Dem leaders change the rules to allow it to pass by a simple majority, on the argument that so doing is imperative to save the U.S. economy from meltdown? Remember, the deal that averted the “nuclear option” this year left the current rules in place, but Dems reserved the right to act again if GOP obstructionism continued.
White House spokesman Jay Carney said Monday that lifting the debt ceiling will be non-negotiable for as long as Barack Obama is president…
“It will always be, as long as he’s president, President Obama’s position that that responsibility is not negotiable. That there’s not a game of trading for political priorities or agenda items that Republicans have not been able to achieve through legislation or the ballot box.”
Representative Greg Walden of Oregon, the House GOP’s campaign chief, says whatever the leadership ultimately decides, it won’t be a clean CR or a clean extension of the debt limit. “I don’t think you could pass a clean CR or a clean debt ceiling,” he says. “But we need to sit down and talk with the Senate and the president and work through all of these issues.”
Sources close to Boehner echo Walden. In private, Boehner has told his allies that he won’t bring up a clean CR, and he’s hopeful that as the deadline nears, President Obama will deal. “There’s no way the president holds firm,” a House GOP insider predicts. “Once that crack opens, I don’t know how the debt limit will be addressed, but it won’t be by Republican capitulation.”
“Pretty much the same story,” cracks Representative Peter King of New York, when asked for an update. “Everything’s the same story.”
Click the image to watch.