story from Talk Business, a TCW content partner
Congress has been focused on student loans, farm bills and immigration on Capitol Hill lately, but that’s about to change.
When Congress returns from its August recess, members will be forced to deal with two familiar, yet fickle foes: the debt ceiling and a government shutdown.
President Barack Obama is standing firm on his “no negotiations” stance regarding the debt ceiling. On the other hand, a majority of Republicans say any deal to raise the debt limit must include major spending cuts in order to ensure that – as U.S. Tom Cotton, R-Dardanelle, puts it, “we won’t be right back here again.”
“A debt-ceiling increase must come with real, concrete reforms to stop President Obama’s reckless deficit spending and Obamacare,” said Cotton, who is expected to announce next week that he’ll challenge U.S. Sen. Mark Pryor, D-Ark., in 2014.
The Treasury Department has not set a specific date as to when the U.S. will likely reach its borrowing cap, but estimates call for sometime after the Labor Day holiday.
DEBT CEILING HISTORY
A Congressional Research Service report, “The Debt Limit: History and Recent Increases,” notes that the debt limit has increased 10 times since 2001.
“Congress, aside from two measures noted above, has modified the debt limit 10 times since 2001, due to persistent deficits and additions to federal trust funds. Congress raised the limit in June 2002, May 2003, November 2004, March 2006, and September 2007. The 2007-2008 fiscal crisis and subsequent economic slowdown led to sharply higher deficits in recent years, which led to a series of debt limit increases,” noted report authors D. Andrew Austin and Mindy Levit in the May 22, 2013 report.
The debt limit has risen from $5.5 trillion in 1996 to $16.394 trillion at the end of the 2012 fiscal year, according to the report.
Austin and Levit conclude that recent debt limit discussions were different in that there was more of a focus on the sustainability of federal budget practices.
“Debate during the 2011 debt limit episode reflected a growing concern with the fiscal sustainability. Over the next decade, without major changes in federal policies, persistent and possibly growing deficits, along with the ongoing growth in the debt holdings of government accounts, would increase substantially the amount of federal debt.”
They also suggest that the upcoming debt limit debate is likely to be soon followed by another.
“Unless federal policies change, Congress would repeatedly face demands to raise the debt limit to accommodate the growing federal debt in order to provide the government with the means to meet its financial obligations.”
On the government shutdown front, Democrats want to continue current funding levels, while Republicans want cuts. Eventually, Congress has to pass what’s known as a continuing resolution, which keeps the federal government funded, by Oct. 1 (the end of the fiscal year) or the federal government could be headed for a possible shutdown … again.
These two issues will be key to 2014 success for both parties, especially for Republicans. Right now, they find themselves in a pretty good position for next year’s midterm elections, particularly in the House, where some experts expect to see the GOP expand its current 17-seat majority.
The Senate isn’t out of the realm of possibility either, though it will no doubt be a tougher road. Senate Republicans will need to steal 5 or 6 seats – dependent upon the outcome of New Jersey’s special Senate election – from Democrats to capture the majority. It’s doable, but then again, they only needed three in 2012 and ended up losing two.
But it’s also the GOP’s to lose.
Since the Tea Party’s 2010 emergence, conservatives have automatically been tied to every fiscal folly on Capitol Hill, fairly or unfairly. Yes, it takes two parties to tango, but Americans have a monetary migraine, and they’re blaming the team in red.
Democrats know it, and they stand to reap the benefits if all goes awry. Right now, Democrats would need a meltdown of epic proportions to gain back the majority in the House, but the ingredients are there, especially on the heels of the latest threat from a faction of Congressional Republicans who say they won’t vote for any budget deal that includes funding for Obamacare.
U.S. John Boozman, R-Ark., disagrees with that position.
“The President is not going to cave on his signature initiative,” said Boozman, who’s voted against Obamacare multiple times, calling it “terrible policy.”
“The idea of shutting down the government for an extended period of time to stop Obamacare is probably not an effective strategy,” Boozman added.
The first-term senator knows that now isn’t the time for an “all or nothing” approach, and that such a strategy could wind up backfiring on Republicans next year.
“These are very high stakes and this is a strategy that could effectively play right into the President’s hand,” added Boozman.
“A shutdown would be reckless, irresponsible, and would hurt our economy,” said Sen. Pryor, the state’s lone Democrat in the Congressional delegation. ”Congress needs to work together to make sure this doesn’t happen.”
“Talking about shutting down the government engages in a dangerous game of political chicken and is never in the best interest of the American people,” echoed U.S. Rep. Steve Womack, R-Rogers, a member of the House Appropriations Committee.
Over the next few weeks, Republicans must find the perfect balance. Unrealistic expectations are sure to irritate voters; however, backing down from a fight over spending undercuts the very reason they were sent to Washington in the first place.