Republicans Say It’s Not All About Money in Debt Showdown

Aug. 21 (Bloomberg) -- Andrew Barkett, chief technology officer for the Republican National Committee, talks about his role at the RNC and strategy to attract voters through social media outlets. He speaks with Betty Liu on Bloomberg Television's "In the Loop." (Source: Bloomberg)

For House Republicans in this year’s budget fight, it’s not all about the money.

Republican leaders are poring over a list of potential sweeteners, such as approving the Keystone XL pipeline, to gather enough votes to present a united front when they face off with President Barack Obama next month.

Their wish list doesn’t resemble old-fashioned horse-trading such as money for a new road or bridge in return for a vote. Rather, the demands today have implications far beyond the narrow lines of House districts and are aimed at keeping together the Republican caucus that has splintered on major legislation this year.

They include clearing the way for TransCanada Corp. (TRP)’s proposed Keystone project, delaying or defunding the Affordable Care Act and curbing spending on entitlement programs such as Social Security and Medicare. Republicans have begun developing a strategy on their price for raising the debt limit.

“They are in great shape right now if they simply could pull together,” Steve Bell, a senior director at the Bipartisan Policy Center in Washington, said in an interview. “They could extract what they want.”

Republican leaders say they are determined to avoid a federal government shutdown or a downgrade of the U.S. credit rating, and their emerging strategy is meant to reflect that.

Counting Votes

House leaders must craft legislation that would gain 217 Republican votes needed for passage in the absence of Democratic support, so that they can avoid blame. Their caucus is divided: right now, as few as 17 Republican lawmakers can make or break their strategy.

They’re also trying to time the votes carefully.

When they return to Washington on Sept. 9 after a five-week recess, lawmakers will negotiate a 60-to-90-day stopgap measure to fund the government in the first few months of the fiscal year starting Oct. 1. The legislation is expected to include no special riders and continue this year’s funding level of $988 billion -- a move that would gain enough bipartisan votes to pass both the House and Senate.

Agreement between the parties may stop there.

By endorsing a temporary spending measure, Republicans will time their demands to three fiscal deadlines coming by the end of the year: to raise the nation’s debt limit; fund the government for the rest of fiscal 2014; and replace about $1 trillion in across-the-board spending cuts, known as sequestration.

‘Difficult Vote’

“There’s hope that in the window there will be a serious discussion that will tie the end of the fiscal year with the sequester and debt ceiling,” Representative Tom Cole, an Oklahoma Republican, said in an interview. “One difficult vote is better than three difficult votes.”

The Bipartisan Policy Center, a nonprofit research group based in Washington, projects that the U.S. will hit its $16.7 trillion borrowing limit some time between mid-October and mid-November, unless Congress acts to increase it.

In August 2011, when lawmakers agreed to raise the debt ceiling on the day the government’s ability to borrow was set to run out, unemployment was 9 percent. Last month it was 7.4 percent, the lowest since December 2008.

Consumer confidence, sinking back to recession levels in 2011, is now close to a five-year high. The budget deficit, $1.3 trillion in 2011, is projected by the Congressional Budget Office to improve to $642 billion this year.

Automatic Cuts

Still, the need to raise the nation’s borrowing limit and the prospect of deeper automatic cuts of $109.3 billion for 2014 will force deficit-reduction negotiations with Democrats, Cole said. Republicans won’t budge from two stances: no more tax increases and no debt ceiling increase until Congress “does something about the debt,” he said. “That’s the condition for my vote.”

Also, Cole said Republicans will agree to continue the automatic cuts even with the defense reductions they don’t like.

“The sequester I really think of as something that Democrats want to end more than Republicans,” he said.

Democrats, for their part, are pushing for a debt-limit increase with no strings attached and want to avoid any deficit reduction tied to the need to raise the borrowing limit.

“We’re happy to negotiate on budget issues,” Representative Chris Van Hollen, a Maryland Democrat, said in an interview. “Democrats aren’t going to agree to these radical demands in order for Republicans to do the right thing and pay the country’s bills.”

Democrats say that the Republican strategy on the debt ceiling is risky, as the party will need to work across the aisle to gain votes.

Republicans ’Divided’

“Republicans should not hold the debt limit hostage and risk another downgrade of America’s credit,” Maryland Representative Steny Hoyer, the chief Democratic vote-counter in the House, said in a statement. “Republicans have been divided and as a result have consistently needed Democratic votes to pass significant legislation through the House.”

While the Democratic-led Senate will negotiate and advance a debt-ceiling increase as well, House Republicans have a significant role in determining the outcome of the debate.

Depending on the list of spending reductions and economic growth policies, Republican leaders want a debt-limit increase that would last until after the 2014 congressional election.

“We’ve got to put together a policy package that will garner the support of a majority, hopefully the unanimity” of House Republicans, said Representative Tom Price, a Georgia Republican who serves as vice chairman of the Budget Committee.

Medicare Costs

As a starting point, Republicans may include on their menu some of the deficit-reduction proposals made by Obama, Price said in an interview.

They include the chained Consumer Price Index, an alternative inflation yardstick, as a benchmark for Social Security cost-of-living increases; requiring higher-income Medicare beneficiaries to pay more and slowing Medicare growth by cutting payments to drug companies and health-care providers.

In addition to building the proposed Keystone XL oil pipeline, Republicans are looking at more leases for oil exploration. They also want to reduce government regulations. Republicans also have to decide whether to delay Obama’s health-care law or cut its funding, Price said.

“Defunding it is still being discussed and appropriately so,” he said.

To contact the reporter on this story: Roxana Tiron in Washington at rtiron@bloomberg.net

To contact the editor responsible for this story: Jodi Schneider at jschneider50@bloomberg.net

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