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LAMBRO: Debt limit showdown looms
Government default could hurt economy and doom Obama re-election
The debt limit battle is heating up, the second of three 2011 heavyweight budget fights that could have a major impact on the 2012 presidential election. The national debt will near its statutory limit of $14.3 trillion next week unless Congress allows the Treasury to continue borrowing enough money to pay the government’s bills. House Speaker John A. Boehner said Monday that Republicans will agree only if President Obama and congressional Democrats agree to major budget reductions with no tax increases.
The GOP’s demand: $2 trillion in spending cuts or it’s no deal. The American people are justifiably fed up with deepening deficits and debts that have weakened our economy and undermined future prosperity. They don’t like the out-of-control spending of the past two years, nor the gimmicks that have permeated budget policies. They want the political game-playing to stop and the adults to take charge of reining in spending without endangering economic growth and job creation.
Mr. Obama has been lurching all over the place on budget strategy, throwing down the gauntlet against Republican budget cuts in last month’s speech that dripped with presidential politics and offered little in the way of significant budget cuts.
The spendthrift budget plan he submitted in February for 2012 was dressed in nice-sounding words that hid its true intent. “Rather than fight the same tired battles that have dominated Washington for decades, it’s time to try something new. Let’s invest in our people without leaving them a mountain of debt,” he wrote in his budget.
“Fine words. Unfortunately, his budget is almost a line-by-line repudiation of this policy,” Heritage Foundation economist J.D. Foster wrote in a budgetary analysis then.
Under Mr. Obama’s budgets, the deficit this year will swell to a record $1.645 trillion, and the national public debt over 10 years would rise by $7.2 trillion, Mr. Foster says. The president’s words are “couched in terms of fiscal restraint and fiscal discipline. The numbers tell a different story,” he adds.
But then Mr. Obama’s polling numbers, giving him poorer marks on budget policy, forced a change in tone if not in strategy.
In an hourlong strategy session this week, Mr. Obama urged Democratic leaders in Congress to cool their rhetoric in the negotiations to come and warned them not to “draw a line in the sand.”
From the White House’s perspective, the debt limit is nothing to fool around with. Without borrowing authority, Treasury Secretary Timothy F. Geithner would have to forgo payments on our debts, although he has tools at his disposal that allow him to keep paying the bills through Aug. 2.
Still, just the hint that the debt limit would not be lifted would send financial markets here and around the world into turmoil, plunging the dollar and threatening another recession that would end Mr. Obama’s prospects for a second term.
Mr. Obama is now caught between his own spend-like-there’s-no-tomorrow policies and his leftist political base, who oppose any cuts in spending. The far-left Moveon.org is urging all Democrats not to agree to any deal that includes cutting Medicare.
Meantime, several dozen business groups, including the U.S. Chamber of Commerce and some of the nation’s largest banks, sent a letter urging lawmakers to raise the debt ceiling in “timely” steps but said nothing about spending cuts.
“Raising the statutory debt limit is critical to ensuring global investors’ confidence in the creditworthiness of the United States,” they said.
In the end, the debt limit will be raised - perhaps in incremental steps - with an agreement to cut spending by some amount over the next 10 years.
However, it isn’t exactly clear how much that debt limit agreement will govern the third battle to come this summer over the size and shape of the 2012 budget and the appropriations to put it into effect.
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