Recalcitrant House Republicans added another layer to the mess on Wednesday when they began linking next year’s anticipated rise of the nation’s debt ceiling to the immediate standoff over tax hikes and budget cuts.
President Barack Obama wasted little time warning the GOP against such a move.
“I will not play that game,” told the Business Roundtable, an organization of CEOs on Wednesday, “because we’ve got to break that habit before it starts.”
Obama was responding to reports that congressional Republicans might be willing to approve extensions of middle-class tax cuts now before using a debt ceiling increase to leverage more spending cuts and other concessions from the administration.
The nation does not need a rerun of the embarrassing 2011 debt ceiling dispute that damaged America’s credit rating, the president said, calling that incident a “catastrophe” that threatened a government default.
Brendan Buck, a spokesman for House Speaker John Boehner, R-Ohio, said: “We agree there is no reason for drama surrounding a debt limit increase. All that is required is the president getting serious about spending cuts.”
Obama’s debt ceiling comments highlighted remarks in which he basically asked the CEOs to help him raise their taxes.
Higher tax rates on the “top 2 percent” of incomes will help the government raise more revenue, contributing to a “balanced” plan that also includes budget cuts in an effort to reduce a national debt that now tops $16 trillion, he said.
“That includes all of you, yes,” Obama told the CEOs, “but not in any way that’s going to affect your spending, your lifestyles or the economy in any significant way.”
Republican opposition to higher tax rates on the wealthy is the main issue preventing an agreement, Obama said. With that “conceptual breakthrough,” he said, “we can probably solve this in about a week; it’s not that tough.”
Obama devoted most of his remarks to summarizing the state of negotiations with Republicans in an effort to avoid the so-called fiscal cliff, the series of tax increases and budget cuts that take effect in 2013 without a debt reduction agreement.
The president insists he will not sign off on a proposal that does not increase tax rates for households earning $250,000 or more per year, while Republicans have repeatedly reiterated their refusal to raise tax rates.
Boehner and other congressional Republicans say the higher rates will kill jobs and slow economic growth. They have proposed new revenues through the elimination of tax loopholes and deductions – and noted on Wednesday that Obama once agreed with their approach.
The Republicans flagged an Obama quote from 2011 in which the president said the government could raise as much as $1.2 trillion in new revenue over 10 years without rate hikes, but by “eliminating loopholes, eliminating some deductions and engaging in a tax reform process that could have lowered rates generally while broadening the base.”
White House officials said those comments were made in the context of overall tax reform, a process that would take months and extend well past the fiscal cliff deadline.
“We’re trying to pass something this month,” said Jason Furman, principal deputy director of the National Economic Council.
GOP members also want Obama to be more specific about spending cuts, particularly on the fast-growing programs of Social Security, Medicare and Medicaid.
“We have to do something about the spending,” said House Majority Leader Eric Cantor, R-Va. “An obsession to raise taxes is not going to solve the problem.”
Republicans also called on Obama to sit down with them on these issues.
“We can’t negotiate with ourselves,” Boehner said.
When or if that negotiation includes the debt ceiling remains to be seen.
The debt ceiling is the maximum amount of money the government can borrow to pay the debts it has incurred. The debt ceiling is nearly $16.4 trillion. At the current rate of government spending, it will need to be raised early next year.
The Obama team has its own debt ceiling proposal, a plan used to settle the 2011 dispute. It gave Obama authority to raise the ceiling on his own, while the House or the Senate could pass resolutions of disapproval. Obama could veto any such resolution, forcing either the House or Senate to muster a two-thirds override vote in order to block the debt ceiling increase.