U.S. Vice President Joe Biden held talks with congressional leaders Tuesday on raising the nation's debt limit before August, so that the United States does not default on its obligations to creditors. The talks come as the top Republican in Congress, House of Representatives Speaker John Boehner, is demanding that President Barack Obama agree to trillions of dollars in government spending cuts in exchange for Republicans voting to raise the nation's debt ceiling.
The latest budget battle between Congress and the White House is heating up, with the White House reacting to tough talk Monday night by Republican John Boehner to Wall Street executives at the Economic Club of New York.
Boehner outlined what House Republicans are demanding in exchange for passing legislation to raise the debt limit. "Without significant spending cuts and changes in the way we spend the American people's money, there will be no increase in the debt limit. And the cuts should be greater than the accompanying increase in the debt limit that the president is given. We are not talking about billions here; we should be talking about cuts in trillions [of dollars] if we are serious about addressing America's fiscal problems," he said.
Asked about the remarks, White House Press Secretary Jay Carney told reporters Tuesday that it would be unwise to hold the debt negotiations "hostage" to demands for spending cuts.
On Monday, Carney outlined the Obama administration's position. "We agree there’s a problem. We agree we need to deal with this. Then you step back and say, 'Well, what’s your target for solving the problem? What’s your goal?' Now, the details of how you get there are complicated; you’ve got to negotiate them. But what’s your goal? Well, we have that as well, $4 trillion over 10 to 12 years," he said.
Boehner says the trillions of dollars in federal spending cuts he is demanding should be immediate, actual reductions and program reforms, not broad deficit or debt targets that put off action to a later date.
Boehner received a polite, but cool response to his Monday speech from the audience of bankers and investors, many of whom had been hoping for reassurances that the Republican-controlled House of Representatives would join with Democratic President Obama and the Democratic-led Senate to raise the debt limit.
Treasury Secretary Timothy Geithner says the government will reach its current $14 trillion debt limit this month, but that he could take advantage of bookkeeping procedures to give Congress until August to pass legislation to prevent the United States from defaulting on its debt obligations. Geithner says failing to increase the debt limit would have a disastrous effect on the economy, and he suggests increasing the debt limit by $2 trillion.
Although President Obama and congressional Democrats say action needs to be taken to reduce the federal budget deficit, they caution that the U.S. economy is in the process of a fragile recovery. While Republicans are calling for deep and immediate spending cuts, Democrats favor spending cuts or tax increases over several years to lower the deficit.
House Speaker Boehner said that for Republicans, raising taxes is not a option. But he made clear that everything else - including popular entitlement programs such as Medicare, government-financed health care for the elderly and the disabled - should be put on the bargaining table. "And with the exception of tax hikes, which in my opinion will destroy American jobs, everything is on the table, and I mean everything," he said.
Republican lawmakers have faced an early backlash from voters in town hall meetings on their plans to drastically change Medicare.
The negotiations in the coming weeks on raising the debt limit are likely to be complicated by the fact that many of the 87 new Republican House members are backed by Tea Party movement supporters who advocate limited government and deep cuts in federal spending.
President Obama has invited Senate Republicans to the White House later this week for talks on the debt ceiling.