President Barack Obama and Republican congressional leaders are staking out positions ahead of next month’s budget battle, setting up their sixth showdown over how to avoid defaulting on the U.S. debt and shutting down the government.
Obama is insisting Congress raise the debt ceiling with no strings attached, while a group of Republicans say they are willing to stop paying the government’s bills unless the president’s signature health care law is defunded.
“Both sides are more dug in than in the past,” said Jared Bernstein, a former chief economist for Vice President Joe Biden who is senior fellow at the Washington-based Center for Budget and Policy Priorities, a fiscal research group.
Lawmakers return from a five-week break on Sept. 9, just three weeks before government funding runs out. For the new fiscal year starting Oct. 1, House Appropriations Committee Chairman Hal Rogers of Kentucky favors a one- or two-month extension of current yearly spending levels, which are $988 billion, said Jennifer Hing, a spokeswoman.
If Congress concurs, that would push the broader fiscal fight into November, when the U.S. is expected to reach its $16.7 trillion debt limit.
The collapse of transportation funding bills in both chambers this week points to a broader stalemate over the fiscal 2014 spending bills. Senate Republicans yesterday blocked a $54 billion measure funding highways, aviation, passenger rail and other transportation projects because it exceeded spending limits earlier agreed to by both parties.
The budget votes could be the last major fiscal-policy ones before the 2014 election, escalating the political stakes as Republicans in the House and Democrats in the Senate fight to keep their respective majorities. Both parties want to avoid taking the blame for a government shutdown while finding a deal that satisfies their core supporters.
For Republicans, that means coming up with a resolution acceptable to the small-government Tea Party activists who are willing to challenge incumbents who negotiate bipartisan deals.
Meanwhile, a shrinking budget deficit makes Democrats less likely to sign off on cuts to Medicaid or other entitlement programs that Republicans want in exchange for raising the debt ceiling, said Stan Collender, a budget specialist and former Democratic congressional aide.
The deficit on July 9 was $512 billion, according to the Congressional Budget Office, which would make it an estimated 3 percent of the economy by the end of the third quarter, according to data compiled by Bloomberg. That’s an improvement from the shortfall in 2009, when the budget office reported that the deficit was 10.1 percent of the gross domestic product.
“This is all preparatory for the 2014 elections,” said Collender, a partner at Qorvis Communications.
The failure of Congress to pass a transportation funding bill and other unresolved business creates uncertainty for states and businesses, said Oklahoma Governor Mary Fallin, a Republican.
“When there’s uncertainty in Washington, D.C., that uncertainty can affect our economic climate,” Fallin said today at a news conference at a National Governors Association meeting in Milwaukee. “We need to have decisions made because the lack of decisions affects our states and how we run our states.”
Obama reinforced his call for increasing the debt ceiling without conditions during private meetings July 31 on Capitol Hill with House and Senate Democrats.
He also wants to undo 10 years of automatic spending cuts that Congress agreed to as part of the 2011 debt ceiling deal and that his political rivals are determined to maintain. The cuts, known as sequestration, reduced projected spending by $85 billion this year and will total $109 billion in 2014.
Republicans, in turn, are insisting on deeper cuts as the price of increasing the debt limit and passing a budget. They’re divided on the strategy.
Senate Minority Leader Mitch McConnell of Kentucky, facing a Tea Party-backed Republican primary opponent, is hearing from a vocal faction -- led by Senators Ted Cruz of Texas, Marco Rubio of Florida and Mike Lee of Utah -- that says they will force a government shutdown if funding is included for the 2010 health-care law.
“If we do not stand on principle now, it is likely that we never will repeal Obamacare,” Cruz, who won his first political race in 2012, said July 30.
During a forum that day sponsored by the Heritage Foundation, a Washington research group that favors small government, Cruz downplayed the negative consequences for Republicans after federal government shutdowns in 1995 and 1996. Republicans in 1996 lost nine House seats and the presidential race.
Twelve Senate Republicans, about a quarter of the caucus, have signed a letter in support of linking the health care law to the budget debate. McConnell is being pressured to join the effort by outside groups as well.
ForAmerica, a Reston, Virginia-based group that advocates for smaller government, this week started a Web campaign that likens the fifth-term senator to a chicken.
“You fund it, you own it,” the spot warns, referring to the health care law.
The strategy of linking health-care funding to broader budget issues puts at risk the party’s House majority, said Republican Representative Tom Cole, a member of House Speaker John Boehner’s leadership team.
“It’s just simply short-sighted politics,” said the Oklahoma Republican.
In the House, Boehner, of Ohio, has his own “tough situation to manage,” Cole said.
Boehner, who was in his third term during the last government shutdowns, is being pressed to resist any compromise by Tea Party-aligned lawmakers who dominate the Republican majority in the House.
“It may be a messy process, but I suspect we’ll find a way to get there,” Boehner told reporters at a July 31 news conference on Capitol Hill. He said August 1 that a stopgap spending measure at the Oct. 1 start of the fiscal year “is in the nation’s interest.”
White House officials say optimism is fading for a long-term fiscal deal, though Obama still wants one. They point to House Republicans as the biggest impediment to a compromise, saying they’re in search of a “common sense” caucus.
“Right now what you see, particularly in the House of Representatives, is that pro-growth fiscal policy is turned on its head,” National Economic Council Director Gene Sperling said at a July 31 breakfast in Washington sponsored by the Christian Science Monitor. “When you just call for these deep cuts or sequester, you’re hurting growth in the short term.”
The president won’t accept splitting the defense and non-defense cuts covered by sequestration or the “budget cut levels that are in many of the House appropriation bills,” senior Obama adviser Dan Pfeiffer told reporters at the breakfast with Sperling.
“There’s not currently anything from the House other than things the president cannot sign,” Pfeiffer said.
Republicans are considering a minimalist deal that would maintain current spending levels and raise the debt ceiling enough to delay the debate until after the 2014 election. White House approval of the Keystone XL pipeline could be part of that bargain for Republicans.
With little pressure from the business community, Wall Street, or either party’s activists to reach a broader agreement that would include changes to the tax code, there’s little incentive to find one, said Steve Elmendorf, a Democratic strategist and former congressional aide with close ties to the White House.
“There’s a lot of cross-currents here that make it difficult to get to anything other than some sort of short term, get-to-the-next-election deal,” he said.