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Boehner signals clash with White House on raising debt limit

House Speaker John Boehner yesterday signaled a clash with the White House and the Democratic-led Senate over raising the U.S. borrowing authority later this year.

“We’re not going to raise the debt ceiling without real cuts in spending,” Boehner, an Ohio Republican, told reporters in Washington.

President Obama and Senate leaders have said they wouldn’t accept anything short of a clean debt-limit increase.

“We will not negotiate over Congress’s responsibility to pay the bills that Congress ran up,” White House press secretary Jay Carney said Tuesday when asked about Boehner’s remarks.

Any discussion about raising the debt ceiling must start with the premise that “we are the United States; we do not default,” Carney said. “The president believes Republican leaders share that conviction.”

Senate Majority Leader Harry Reid, a Nevada Democrat, said yesterday that Democrats are “not negotiating on the debt ceiling.”

Congress should pass a debt-ceiling increase without any “hijinks” to ensure a stable economy, Sen. Chuck Schumer, a New York Democrat, told reporters July 18. “Attaching other issues to the debt ceiling is playing with fire,” he said.

Boehner said yesterday that Congress needs to find “significant cuts” in federal spending to replace $1.2 trillion in across-the-board spending cuts over nine years.

In addition to spending cuts, Republicans say they’re determined to make changes to entitlement programs such as Medicare, Medicaid and Social Security.

Republican leaders have weighed whether to spell out the steps and timing of a tax-code rewrite as a trigger for raising the U.S. borrowing limit. Their goal is to curb tax breaks and use the resulting revenue to lower rates. House leaders haven’t provided details of their strategy.

In 2011, lawmakers fought for months over raising the nation’s debt limit. Obama signed a debt-limit increase into law on Aug. 2, 2011, the day the Treasury Department warned that U.S. borrowing authority would expire. The bitter negotiations led to the Budget Control Act of 2011, which set discretionary spending caps for 10 years and created a process that resulted in the automatic spending cuts known as sequestration. The cuts started in March.

With the possibility of a fight over the debt limit after the five-week congressional recess that starts in August, Democrats said they worry about repeating the events of 2011.

“It sure will sooner or later create a crisis situation,” Sen. Carl Levin, a Michigan Democrat, said in an interview at the Capitol. “It’s that kind of total rigidity that makes it very difficult to get things done: throwing down the gauntlet here and just drawing lines in the sand.”

The need to increase the nation’s borrowing authority will collide with negotiations to fund the government for the 2014 fiscal year that begins Oct. 1. Negotiations will be centered on reducing the deficit and finding ways to replace the spending cuts.

The economy is showing signs of generating more revenue, even if the recovery is sluggish.

Government tax receipts have climbed 14 percent above the level a year ago, according to Alex Brill, a research fellow at the American Enterprise Institute, who was interviewed by Bloomberg BNA. Economists credit economic growth as well as additional revenue from the tax increase Congress passed early this year.

The Congressional Budget Office projected in May that federal tax receipts would climb from $2.45 trillion in 2012 to $2.81 trillion in 2013, and to $3.78 trillion by 2017.

Congress voted at the end of January to suspend the nation’s debt limit until May 19, temporarily removing the risk of a default. When the ceiling was restored May 19, it increased to $16.7 trillion to reflect the government’s borrowing during the past few months.

By shifting money among government accounts, the Treasury Department can continue borrowing for several months, perhaps as late as October or November.

In May, House Republicans voted to exempt federal payments to creditors from the U.S. debt limit. The House measure would ensure that U.S. government bondholders will continue to be paid and that Social Security benefits won’t be interrupted if a standoff over the nation’s debt limit causes a cash crunch. The Obama administration would be left to decide which of the government’s other bills to pay using tax revenue.

The Democratic-controlled Senate didn’t take up the bill.

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