Republicans back off from fiscal clash

EMPTY THREATS?:Despite having previously vowed to play hardball over the nation’s debt ceiling and the earlier ‘fiscal cliff,’ Republicans again compromised on fiscal issues

Reuters, Washington

Sun, Jan 20, 2013 - Page 13

Republicans in the US House of Representatives backed away on Friday from a fiscal clash with US President Barack Obama next month that could have risked a government default and chaos in financial markets, shifting to a new, less aggressive stance.

Top Republican leaders, meeting in Williamsburg, Virginia, said they were prepared to allow the US government to borrow enough money to keep it fully operating for the next three months without demanding immediate spending cuts from Obama.

Instead, the Republicans, who control the House, will require as part of the legislation raising the debt ceiling, that the Democratic-led Senate pass a budget plan by April 15.

If the Senate fails to act, they said, members of the US Congress would not get paid. How that might work in practice, in light of existing budget law and constitutional restrictions on changing congressional salaries in the middle of a term, was unclear. House Republicans hope to pass the legislation next week.

Republican leaders, including House Speaker John Boehner and Majority Leader Eric Cantor, made the announcement after an annual retreat at a resort in Williamsburg, where members listened to pollsters describe the party’s decline in standing among US voters.

It followed a humiliating defeat in the “fiscal cliff” battle that ended on New Year’s Day with Obama getting tax increases he sought on the wealthy without committing to significant budget cuts Republicans were seeking in return.

The announcement marked a major climbdown for Republicans, who have seen the debt ceiling as their strongest point of leverage in Washington’s partisan spending wars, despite the consternation it caused the White House, global financial markets and public opinion.

Indeed, the main target of the new approach appeared to be the US Senate rather than Obama.

The White House on Friday welcomed the three-month extension plan as long as it was not conditioned on spending cuts. Obama has argued that negotiations on spending cuts should be part of larger deficit reduction talks, and not be tied to the debt ceiling.

“We are encouraged that there are signs that Congressional Republicans may back off their insistence on holding our economy hostage to extract drastic cuts in Medicare, education and programs middle class families depend on,” White House spokesman Jay Carney said in a statement.

Adam Jentleson, a spokesman for Senate Majority Leader Harry Reid also said the Republican approach was reassuring.

“If the House can pass a clean debt ceiling increase to avoid default and allow the United States to meet its existing obligations, we will be happy to consider it,” he said in a statement.

A spokesman for House Minority Leader Nancy Pelosi was less receptive. “This proposal does not relieve the uncertainty faced by small businesses, the markets and the middle class. This is a gimmick unworthy of the challenges we face and the national debate,” Drew Hammill said.

The details on the new Republican approach appeared less pressing to party leaders than defusing the politically and economically explosive debt ceiling battle that was expected in late next month and early March.

The US Treasury needs congressional authorization to raise the current US$16.4 trillion US debt limit sometime between the middle of next month and early March. How long a debt ceiling lasts — a few months or a few years — depends on the amount of borrowing authorized.

Republicans had promised to use the occasion to demand deep spending cuts from Obama and his Democrats, and some had said they were willing to push the government to the brink of default if their demands were not met.

That sort of rhetoric all but vanished on Friday.