May 16 (Bloomberg) -- House Speaker John Boehner said “it’s clear” the U.S. must raise its debt limit, responding to President Barack Obama’s efforts to secure backing to extend the government’s borrowing authority.
“At some point it’s clear to me that we have to increase the debt ceiling,” Boehner, an Ohio Republican, said yesterday on CBS’s “Face the Nation.” “And as we do, we’re going to do it in a way that addresses America’s long-term fiscal challenges.”
Republicans are seeking spending cuts and no tax increases in exchange for supporting a higher debt limit. The government projected this month that the $14.3 trillion debt ceiling will be reached today. Treasury Secretary Timothy Geithner has said that while he can juggle accounts for a time, he will run out of options for avoiding default by early August.
In an April 13 speech, Obama proposed a long-term deficit-reduction package of about $4 trillion over 12 years. It would include $2 trillion in spending cuts, $1 trillion in tax increases and $1 trillion in reduced interest payments.
Failure to increase the debt limit might disrupt the global financial system and plunge the nation into another recession, Obama said on “Face the Nation” in a segment taped May 11 in Washington for broadcast yesterday.
If investors “around the world thought the full faith and credit of the U.S. was not being backed up, if they thought we might renege on our IOUs, it could unravel the entire financial system,” Obama said. “We could have a worse recession than we’ve already had.”
Boehner, who in a May 9 speech demanded spending cuts greater than the amount of any debt-ceiling increase, told CBS yesterday that he understood “what the president was saying about jeopardizing the full faith and credit of the United States.”
“Our obligation is to raise the debt ceiling,” he said. “But to raise the debt ceiling without dealing with the underlying problem is totally irresponsible.”
Last month Obama appointed Vice President Joe Biden to lead negotiations with a small bipartisan group of congressional leaders to try to strike a deal on reducing the debt and deficits. The negotiators have met three times with Biden; the president held separate talks with Senate Democrats and Republicans May 11 and May 12.
“I’ve said, ‘Get them in a room, hammer out a deal, and make sure that we don’t even get close’” to defaulting on the nation’s debt, Obama said on CBS yesterday.
Senator Jon Kyl, an Arizona Republican who is among the lawmakers meeting with Biden, said the negotiators have found bipartisan agreement on “a couple hundred billion dollars” when about $2 trillion in savings is needed.
“It’s pretty small-ball compared to the overall job that we’re going to have to do,” Kyl, the second-ranking member in the Senate Republican leadership, said on “Fox News Sunday.”
Senator Richard Durbin of Illinois, the chamber’s No. 2 Democrat, said on the same program that the priority should be addressing the budget deficit by, among other things, reducing spending, “responsibly” changing entitlement programs and cutting tax breaks received by the five largest oil companies.
“We better be careful,” Durbin said. “It’s about the reputation of the United States and the economy. If we play games with it or play politics with it, and default on our national debt, we could plunge this country back in a recession with even deeper unemployment.”
Amid debate about the deficit in Washington, bond market yields in the U.S. are lower now than when the government was running a budget surplus a decade ago. The yield on the benchmark 10-year note closed at 3.17 percent on May 13, according to Bloomberg Bond Trader prices -- well below the average of 5.48 percent in 1998 through 2001, the last time the U.S. had a budget surplus.
Senate Minority Leader Mitch McConnell, a Kentucky Republican, appearing yesterday on CNN’s “State of the Union,” said he wants the extension of the debt limit coupled with broad fiscal reforms.
Obama told CBS that debt reduction must be “balanced” and include tax increases.
“Are we going to make sure no single group -- not seniors, not poor folks, not any single group -- is carrying the whole burden? Let’s make sure the burden is shared,” he said.
Obama said he would resist cuts in such areas as medical research; infrastructure such as roads, bridges or railroads; or college loans for needy students.
Boehner said that “for quite a while” he has privately discussed with Obama his idea for making drastic spending cuts and changes in entitlements like Medicare and other programs in tandem with raising the debt ceiling.
The speaker said he told Obama, “‘Let’s lock arms and jump out of the boat together.’ I am serious about dealing with this. And I hope he is just as serious.”
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