House Republican leaders Friday offered President Barack Obama a three-month reprieve to a looming, market-rattling debt crisis, backing off demands that any immediate extension of the government's borrowing authority be accompanied by stiff spending cuts.
Republicans hadn't settled on full details, but the measure would give the government about three more months of borrowing authority beyond a deadline expected to hit as early as mid-February, No. 2 House Republican Eric Cantor of Virginia said Friday.
How did this happen? Slate's Dave Weigel reported that GOP leadership demonstrated that a series of short-term debt ceiling hikes has helped achieve larger and more comprehensive deficit-fighting legislation in the past, which may have helped sway some Republican backbenchers.
“They showed us a slide of five or six times in the last 30 years where we’ve come to some really good agreements,” said Rep. John Fleming, a conservative from Louisiana who’d sponsored legislation that would prevent the debt limit from being abolished in a budget deal. “Leading up to every one of those was several short-term increases. It keeps the pressure up until finally both sides decide, ‘You know what? We’ve got to get this off the table until we get a solution everyone can live with that fixes America’s problems.’ ”It's incredibly important that Republicans clearly communicate to their caucus how potent of a weapon that the debt ceiling is when it comes to negotiation. The debt ceiling needs to be raised, period. The U.S. passing the point at which the Department of the Treasury's "extraordinary measures" run out would be catastrophic to both the American and world economic situation. That doesn't mean that it's prudent not to use the debt ceiling as leverage to push for deficit reduction, just that it's also important to recognize just how important raising the debt ceiling is.
The media have portrayed this as a surrender for the Republicans, but they will attempt to force a vote on a budget resolution in the Senate at the same time - something Majority Leader Sen. Harry Reid has refused to do for years. It would be a symbolic victory, but accompanied by no serious action on America's long-term debt and budget deficit.
The Obama White House was "encouraged" by the GOP's reported plan, but even a clean debt ceiling hike - especially a short-term one - might not be enough to avert a downgrade by credit-ratings agencies. Fitch, one of the three main credit ratings agencies, put it in explicit terms:
[E]arlier this week, Fitch, one of the three main credit-rating agencies, put lawmakers on notice: A downgrade hinges not just on addressing the debt ceiling, but on Congress’s ability to tackle the government’s growing deficits.
“In the absence of an agreed and credible medium-term deficit reduction plan ... the current Negative Outlook on the 'AAA' rating is likely to be resolved with a downgrade later this year even if another debt-ceiling crisis is averted,” the agency wrote in a news release.
Raise the debt limit, they said, but don’t stop there.
For now, it looks like we're going to get a relatively clean debt ceiling hike, but only a temporary one. This will set up further budget fights about spending sequestration, scheduled to take place on March 1, and overall budget legislation, when the continuing resolution is scheduled to lapse on March 28. There will be no shortage of high-profile budget debates on Capitol Hill in the coming months, and characterizing the House GOP's action as "surrender" on the part of Republicans strikes hollow.