The United States may be faced with new uncertainties over the critical issue raising its debt ceiling, on top of the continuing Government shutdown, as the Republicans are now demanding spending cuts before approving enhanced debt limit.
The Republican threat, coming in the face of President Barack Obama’s refusal to hold any negotiations on the subject, is raising the spectre of a first-ever US debt default — a possibility that is fraught with disastrous global implications.
The US Congress will have to raise the debt limit by October 17 if America is to avert a debt default, with all its attendant domestic and international consequences, including another round of recession.
Fears of a default owing to Republican stronewalling came to the fore on Sunday with Speaker John Boehner making it clear that House Republicans won’t support raising the Government’s borrowing limit without the Obama administration agreeing to new spending cuts.
Boehner’s sharp comments, made in an interview to ABC News, were at variance with his own assurances last Thursday that he would not let America default on its debt, promising a deal that would attract sufficient support from both Republican and Democratic members.
Chiding the Obama administration for refusing negotiations, Boehner said he wants a “serious conversation” about spending, with no tax increases. Asked if the US would default on debt payments without concessions from the administration, he remarked: “That’s the path we’re on.”
The Boehner bombshell on the debt issue came even as the government shutdown entered its seventh day on Monday, with no progress whatsoever towards a resolution. It’s a veritable battle of attrition with both the parties having dug their heels in.
The Republican stance drew sharp criticism from Treasury Secretary Jack lew, who warned the Congress against “playing with fire”. In his own Sunday interviews, lew called upon the Republican-led House of Representatives to quickly pass legislation to reopen the Government and approve raising the country’s $16.7 trillion debt limit.
A Treasury Department report last week had said that a default on US debt “has the potential to be catastrophic: credit markets could freeze, the value of the dollar could plummet, U.S. interest rates could skyrocket, the negative spillovers could reverberate around the world, and there might be a financial crisis and recession that could echo the events of 2008 or worse”.
But a defiant Boehner said: “We’re not going to pass a clean debt limit increase. I told the president, there’s no way we’re going to pass one. The votes are not in the House to pass a clean debt limit, and the president is risking default by not having a conversation with us.”
Obama and Senate Democrats have been demanding that Boehner put to vote “a clean CR (continuing resolution)”, shorn of riders such as the earlier one seeking a one-year delay of “Obamacare” that came to be rejected by the Democrat-led Senate.
As Boehner suggested a clean measure to raise debt ceiling could fail for want of Republican support, senior Democratic Senator Chuck Schumer commented: “let me issue him a friendly challenge. Put it on the floor Monday or Tuesday. I would bet there are the votes to pass it.”
Sticking to his line, Boehner countered: “I have 233 Republicans in the House, and you’ve never seen a more dedicated group of people who are thoroughly concerned about the future of our country. They believe that Obamacare, all these regulations coming out of the administration, are threatening the future for our kids and our grandkids. It is time for us to stand and fight.”