Daunting hurdles remain for two legislative plans to cut U.S. government spending, raise the federal borrowing limit and avert a national debt crisis experts warn that could stall America’s fragile economic recovery and send financial shock waves around the world.
With a deadline to raise the federal debt ceiling less than a week away, the two latest plans, one Republican, the other Democratic, face almost-certain defeat in one or both chambers of a politically-divided Congress.
Senior Republican lawmakers scrambled Wednesday to rework a plan put forth by House of Representatives Speaker John Boehner after nonpartisan congressional analysts said it would fall short on promised spending cuts. And some members of the conservative and libertarian Tea Party faction of the Republican caucus vowed to vote against the plan or any proposal that would raise the nation's debt ceiling.
“I pledge to you that I will not vote for any bill that raises the debt ceiling,” said Republican Representative Paul Brown of Georgia.
House Republican leaders are pleading for party unity, without which the Boehner plan might be doomed in the House and leave a Democratic proposal as the only viable alternative. Both plans call for spending cuts, but the Boehner proposal would raise the debt ceiling in two stages. The Democratic plan would provide one large-scale increase, preserving federal borrowing authority through next year’s national elections.
In the Senate, one of the Republican Party’s senior statesmen, John McCain of Arizona, chided first-term House Republicans who dismiss the consequences of a possible U.S. debt default.
“The idea seems to be that if the House GOP [Republicans] refuses to raise the debt ceiling, a default crisis or gradual government shutdown will ensue, and the public will turn en masse against [President] Barack Obama, that the Republican House that failed to raise the debt ceiling would somehow escape all the blame. The reality is that the debt limit will be raised one way or another. And the only issue now is, with how much fiscal reform and with what political fallout?,” McCain said.
Democrats pounced on Republican dissension over the Boehner plan.
“The speaker’s plan is on life support, and it is time for him to pull the plug. The bill remains a nonstarter in the Senate, and the president will never sign it,” said Democratic Senator Charles Schumer of New York.
Senate Majority Leader Harry Reid, who crafted the Democratic proposal, said his plan abides by Republican demands for no tax increases and deep spending cuts, and is therefore a compromise that deserves bipartisan support.
“We have compromised. The Senate bill was written to take care of the problems Democrats said they had and Republicans said they had,” Reid said.
The Reid plan leaves untouched expensive entitlement programs that provide income and health care for retirees, programs many Democrats are reluctant to alter.
Republicans say that the Reid plan’s promised spending cuts are an illusion. They note, for example, that it counts projected savings from U.S. military withdrawals in Afghanistan and Iraq, savings that are already included in current budget projections.
“I remain as committed as ever to resolving this crisis in a way that will allow us to avoid default, without raising taxes, and to cut spending, without budget gimmicks,” said Senate Minority Leader, Republican Mitch McConnell.
Even if the federal borrowing limit is extended, it is unclear whether either plan adequately addresses America’s long-term fiscal imbalances. The U.S. national debt stands at $14.3 trillion.
Analysts say that without aggressive measures to slow the growth of that debt, credit ratings agencies will assign a higher risk rating to U.S. Treasury bonds, which the federal government sells to investors and foreign governments to finance deficit spending. Such a downgrade, they warn, might lead to higher interest rates that could stall America’s fragile economic recovery.