As the Treasury department has been warning — and as House Republican leaders have promised — the United States hit its debt limit Monday morning. The government can no longer meet its obligations by borrowing more money. And since incoming revenues aren’t sufficient to pay for the services Congress has ordered and for interest payments on existing debt, the Treasury department is taking a series of ever-more extraordinary measures to pay all of its bills.
It can get away with this, according to Secretary Timothy Geithner, until August 2. If Congress doesn’t lift the debt ceiling by then, the country will default, triggering a number of severe economic consequences.
Already, Geithner has stopped issuing securities to states that help them keep their books in balance and maintain infrastructure. Today, the government will defer payments to and investments in federal pension funds — pensions Republicans want federal workers to pay more money into than they currently do.
But despite these difficult measures, you won’t get the impression that time is of the essence from congressional Republicans.They are refusing to raise the debt limit without substantial cuts to government spending and entitlement programs. GOP leaders on Capitol Hill continue to vacillate between claiming that the consequences of default would be smaller than the consequences of not cutting spending — “failing to do something about the debt would be far worse in the long-run than failing to raise the debt limit,” said Senate Minority Leader Mitch McConnell (R-KY) on the Senate floor Thursday — and admitting that they’re using the threat of a default to make good on long-standing conservative commitments — “What better time to do something about the debt than in connection with raising the debt ceiling?” McConnell said at a press conference the same day.
The brinksmanship comes despite the fact that some of the GOP’s strongest allies in the business community and on Wall Street are pushing for a swift resolution to the fight.
Still, Republicans have thus far set the terms of the debate, at least in the public realm. They insist they will not accept increasing revenues as part of any deal. They want to implement budget process reforms that will make it easier to cut spending in the future, and say they’ll only raise the debt limit by as much or less than the “trillions” in spending cuts they’re able to enact as part of a deal. Underneath that, they’ve expressed willingness to negotiate the precise cuts to discretionary, defense, and entitlement spending. But their opening bid — the House GOP budget — includes enormous cuts to Medicare and Medicaid. Indeed, the GOP’s top budget guy, Rep. Paul Ryan (R-WI), is expected to double down on his proposal to slash and privatize Medicare in a speech today. House Speaker John Boehner (R-OH) said Sunday he sees no substantial movement from the Obama administration in his direction — increasing the sense that a deal is still far off.
However, the precise details of negotiations between House and Senate leaders and the White House, led by Vice President Joe Biden, remain tightly held. So there’s likely a gap between the perceptions presented in public statements and the reality behind the scenes. And that gap will likely grow as we approach August, and the consequences of dithering and the pressure to avoid calamity mount.