White House budget director Jacob Lew said he was confident Congressional Republicans and Democrats will reach a deal with the Obama administration to raise the debt limit, averting a default by the early August deadline.
“I can’t argue that it’ll be pretty,” Lew said of the struggles to achieve a debt accord in a question-and-answer session last night at a meeting of the Economic Club of Washington. “I think there’s a shared understanding that it’s just unthinkable” for the U.S. to default on its debts.
Asked directly if there would be a U.S. default, Lew replied, “No.”
Congress and the White House are negotiating over addressing long-term deficits in negotiations as a deadline to raise the debt limit approaches. President Barack Obama is urging Congress to raise the $14.3 trillion ceiling by Aug. 2 to avoid a government default on its loans, while Republicans are seeking spending cuts in return for approving an increase.
Obama has put Vice President Joe Biden, a former senator from Delaware, in charge of finding common ground on a bipartisan budget deal. Biden is scheduled to meet with lawmakers on Capitol Hill today, after three negotiating sessions since May 5. The agenda includes addressing Medicare and health-care program for the military.
Much Work Ahead
“There’s a lot of trust being built up,” so talks can enter a serious stage, said Lew, although “I think we have a lot of work ahead of us” that will take “weeks” to resolve.
Republican Senator Jon Kyl of Arizona, the chamber’s second-ranking Republican, said he doubts there’ll be an accord for several weeks.
“We continue to believe that this group will generate an agreement to raise the debt ceiling by the Aug. 2 deadline,” Chris Krueger, an analyst at MF Global Inc.’s Washington Research Group said in a message to clients.
“The Biden talks are really the only game left in town,” Krueger said in response to an e-mail from Bloomberg News. “Time is running out and they continue to meet.”
Lew said it’s important that Social Security be separated from the current debt and deficit debate.
“We owe it to them” to have a system that’s solvent in 75 years, Lew said, referring to beneficiaries. Mixing that with deficit reduction “confuses the issue” because Social Security isn’t contributing to the deficit, he said.
“It’s not fair to say Social Security caused the problem” of record-setting deficits. “It will complicate and slow” talks if Social Security is brought into the debate, Lew said.
Biden and lawmakers have a wide budget menu from which to pick: Obama’s Feb. 2012 budget that projects $1.1 trillion in cuts over 10 years; a revised April 13 Obama plan calling a deficit-reduction package of $4 trillion over 12 years; a plan by U.S. Representative Paul Ryan proposing $6 trillion in cuts over 10 years that passed the House April 15 on a 235-193 vote, and a so-called “Gang of Six” plan that may propose a mix of spending cuts and tax increases along the lines of a presidential commission last December.
“Finding common ground between the House, Senate and White House will not be easy,” Scott Gluck, a lawyer at Venable LLP in Washington, told clients in a newsletter yesterday. The firm tracks legislation and provides lobbying services to corporations, institutions and individuals.
That’s because “it is not clear” that tax increases would pass the Republican-controlled House or that cuts in social programs, such as Medicare, would pass the Democratic-controlled Senate, Gluck said.
Talks in the Biden group so far have been described as progressing but no compromise has emerged.
“Nobody wants default to happen, but at the same time we don’t want to rubber stamp just a debt-limit increase that shows we’re not getting our situation under control,” Ryan, the Republican House Budget Committee chairman, said May 22 on NBC’s “Meet the Press” program. He said a budget deal isn’t likely until close to the Aug. 2 deadline.
Lew also said the U.S. unemployment rate is declining.
“We show it trending down,” said Lew, when asked for his prediction on the rate in November 2012, the next U.S. presidential election. “We obviously would like to get unemployment as low as we possibly can,” he said.
The moderator for the program was David Rubenstein, president of the Economic Club and co-founder of the Carlyle Group, the world’s second-largest private-equity firm after Blackstone Group LP.