Now that a budget agreement has been reached to fund the government through September, the most pressing issue for Republicans and Democrats is the impending debt ceiling issue. Currently the United States has a debt of $14.223 trillion. The debt is currently growing, and is expected to reach the statutory limit of $14.294 trillion by May 16th at the latest. If the debt ceiling is not raised, the Treasury Department will have to start slowly shutting down government programs, including possibly Social Security and Medicare, in order to avoid default. Even those “extraordinary measures” will only delay a default on the United States until late June or early July at the latest. The consequences of a default would be severe to say the least (likely resulting in another severe recession under the best case scenario), yet both the Democrats and Republicans still cannot even decide what their position is on the issue.
Republicans immediately started getting asked about the debt ceiling after they won the House last November. At the time the more sensible Republicans, like Speaker Boehner, conceded that the debt limit would need to be raised. Boehner has been quoted as saying that a failure to raise the debt limit could lead to “financial disaster.” Even conservatives like Rep. Paul Ryan (R-WI) have conceded that the debt ceiling needs to be raised.
However, some conservatives are also stating that they must first receive some kind of concessions before voting to raise the debt limit. Most recently Rep. Darrell Issa (R-CA) said the following in an interview on Fox Business Network, “It’s inevitable that it will pass. We will undoubtedly vote. I will vote to raise it. It does have to come with a real come-to-Jesus moment where we say what are we doing along with raising the debt ceiling.” Issa seems to represent the ever-evolving and confusing view of Republicans, who concede that the debt limit simply has to be raised, but also want some kind of concession before raising it. House Majority Leader Eric Cantor (R-VA) has also reflected this viewpoint in interviews today, suggesting that a default is not an option, but also saying that the Republicans must get what they want before they vote to avoid a default.
Earlier this week the Obama administration actually seemed willing to concede this crucial point. Key White House advisor David Plouffe signaled that the President expected “some strings attached” to the debt ceiling raise. Since that time, the Obama administration has argued that the Congress has a moral obligation to raise the debt ceiling, and have demanded a “clean bill” with no concessions or strings attached.
The Democrats in Congress also appear split. Sen. Joe Liebermann (I-CT) lists himself as an independent, but he goes to the Democratic caucus. Recently Liebermann was quoted as saying he expects a deficit reduction plan to accompany a vote to raise the debt ceiling. However, the Democrats in the House have sent a letter to their leadership urging them to demand nothing less than a “clean bill.”
The confusion is disconcerting since the parties will have a hard time making a bipartisan agreement if they cannot even agree within their parties. In addition, if the debt ceiling is not raised the financial markets will likely start accounting for the risk of default well before the actual default, potentially endangering the fragile economic recovery.