In the renewed battle over raising the nation's borrowing limit, President Obama says the government must take on more debt unconditionally to pay for the bills that Congress has racked up, while congressional Republicans counter that spending cuts must be included to break what they say is a ruinous cycle of endless borrowing.
Fiscal analysts say both sides are partly correct. Without an increase in the debt ceiling, perhaps as soon as Feb. 15, the federal government won't be able to pay some of its obligations. And without significant spending cuts, the national debt will continue to soar well past the current limit of $16.39 trillion.
"The truth is somewhat in between," said David Walker, former U.S. comptroller. "The Republicans are right that spending is out of control, and that they're trying to do everything they can to be able to get some leverage to control spending. But I think the White House is also right in saying that the debt ceiling is primarily about paying for bills that have been appropriated and laws that have been passed."
At stake in the showdown is the U.S. economy.
Mr. Obama says Republicans are imperiling stock markets, job growth and low interest rates with their threat to halt borrowing and to force a partial government shutdown if the president doesn't agree to cuts. Republicans argue that Mr. Obama is wrecking the economy just as surely by running up a series of trillion-dollar deficits that are frustrating business growth.
U.S. Chamber of Commerce President Thomas Donohue said Thursday that runaway debt is "the single biggest threat to our economic future."
"Congress and the administration must focus their attention on this critical priority," Mr. Donohue said in Washington in his annual speech on the state of American business. "Economic growth cannot solve all of our problems, but without growth, we will not be able to solve any of them."
When the same debate over the debt ceiling raged in the summer of 2011, Standard & Poor's downgraded U.S. credit and the Dow Jones industrial average plummeted 635 points, one of the worst single-day drops in its history.
Mr. Obama insists he won't negotiate with Congress this time over raising the debt ceiling. His spokesman, Jay Carney, said it would be "irresponsible to flirt with default."
The federal government collects about $2.2 trillion in tax revenue annually, and some obligations such as Social Security benefits would continue to be paid, regardless of a partial or temporary government shutdown. But many Republican lawmakers are also leery of taking this risky step, even as they agree on the need to use the debt ceiling issue as leverage to obtain meaningful spending cuts from the president.
Republicans say the administration and Senate Democrats are being fiscally irresponsible by failing for the past three years to approve a federal budget, leaving the government without a set of annual spending priorities.
"What we have seen in recent years is an abandonment of the federal budget process," a senior Senate Republican aide said. "You hear the White House say things like, 'We never used to have these fights over the debt limit.' That may be true, but we also didn't used to completely ignore the statutory budget process. So the situation we're in now is, the debt limit is one of the last remaining points of leverage that Republicans in Congress have to try and get some control over the federal government."
Mr. Walker, founder of a nonprofit group called Comeback America that advocates fiscal responsibility, said Senate Democrats and their allies in the White House are at fault for ignoring budgets, while House Republicans have approved annual spending plans.
"The House has done its job; the Senate has failed to do its job," Mr. Walker said. "It's really unacceptable, because there's only one thing under the Constitution that the Congress is supposed to do every year — pass appropriations bills to fund the government."
Democrats counter that recent appropriations agreements have set a ceiling for annual spending, which is essentially a framework for an overall budget, with specific appropriations filled in later by various congressional committees. Mr. Walker rejects that argument.
"When you do a budget for your house or for your company, you don't just do a total budget," he said. "You do a budget that has all the details. And you make tough choices about where you're going to spend more and where you're going to spend less."
The solution, Mr. Walker believes, is for Mr. Obama and Congress to raise the borrowing limit through the end of this year while working on an elusive "grand bargain" on deficit reduction, to include long-term spending cuts on entitlements and other programs, as well as tax reform and tax increases. But many Republican lawmakers say the recent "fiscal cliff" deal, which raised taxes on families earning more than $450,000, was the only tax increase Mr. Obama will get.
Addressing the debt ceiling, historically, has been a bipartisan affair. Republicans point out that Democrats in 1979 created the so-called "Gephardt rule," named for former House Majority Leader Richard A. Gephardt of Missouri, which attached increases in the debt ceiling to annual budget bills. Although it fell out of favor periodically and was discontinued in 2011, Congress did use this budget-related tool to agree on borrowing limits four times.
A report by the Congressional Research Service last month said the debt limit "provides Congress with the strings to control the federal purse." Congress enacted a debt limit in 1917 and has raised the limit more than 70 times since 1962. Until recently, those actions were usually routine.
But with the cumulative federal debt now surpassing the value of the nation's annual total economic output, the question of raising the borrowing limit has grown more contentious. With the stakes so high and the opposing positions so entrenched, the proposed solutions have ranged from the president invoking the 14th Amendment, which says the validity of the nation's debt "shall not be questioned" (the White House has ruled out this option), to having the Treasury mint a $1 trillion coin and deposit it in the Federal Reserve (an option that the White House hasn't specifically ruled out.)
Mr. Walker called the coin option "one of the dumbest ideas in the history of mankind."
"Why would we waste the valuable metal?" he asked. "Why not just use Monopoly money?"
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