Obama Sets Meeting on Debt Limit

President argues for long-term solution for government’s finances.

President Barack Obama said he opposes a deficit-cutting measure that would only allow for a short-term increase in the country’s debt limit as he called a meeting tomorrow with Republican and Democratic lawmakers to work toward long-term fixes in the government’s finances.

 The president’s comments were the second time in less than a week that he has come to the podium to publicly push lawmakers to secure a deal that addresses basic solutions to deficit spending while averting a first-ever U.S. default on its obligations.

 The Obama administration and congressional leaders are working to complete a deal on a long-term budget reduction package by July 22. That would give Congress enough time to craft legislation raising the $14.3 trillion debt limit before Aug. 2, when the Treasury Department has said that its borrowing authority expires. Republicans have signaled that they could accept a short-term package -- an outcome that would force Congress to vote a second time on the debt ceiling before the 2012 elections and that Obama would like to avoid.

 “I don’t think the American people sent us here to avoid tough problems,” Obama told reporters at the White House yesterday. “That’s, in fact, what drives them nuts about Washington, when both parties simply take the path of least resistance. And I don’t want to do that here.”

Responding to Obama’s comments, House Speaker John Boehner said the president’s proposals for new sources of revenue wouldn’t muster enough support to pass Congress.


‘Fruitless’ Discussions
“I’m happy to discuss these issues at the White House, but such discussions will be fruitless until the president recognizes economic and legislative reality,” Boehner, an Ohio Republican, said in a statement.

The White House and Democrats have been intensifying a showdown with Republicans over whether tax increases should be part of a final agreement. While Obama didn’t go so far as to say that he would veto a short-term measure, he said the negotiations present “a unique opportunity to do something big to tackle our deficit” and repeated his calls for a “balanced approach” to a solution that includes both spending cuts and revenue increases.

 “It’s my hope that everybody is going to leave their ultimatums at the door, that we’ll all leave our political rhetoric at the door, and that we’re going to do what’s best for our economy and do what’s best for our people,” Obama said. “This should not come down to the last second.”


Another Option
Still the calendar may force another option. A more likely outcome is a short-term increase in the debt ceiling coupled with commensurate spending cuts that lawmakers agree to over the next couple of weeks, buying them time to complete work on a larger measure when they return from their August recess, said Bill Hoagland, a former Republican staff director of the Senate Budget Committee.

“I think it’s too late,” Hoagland said.

Senate Majority Leader Harry Reid has scheduled a vote for later this week to demonstrate support in the Democratic-controlled chamber for raising taxes on people who earn $1 million a year or more. His resolution calls on those taxpayers to “make a more meaningful contribution to the deficit-reduction effort.”

The Democrats and the White House stepped up their push for tax increases when Obama, during a June 29 news conference, accused Republicans of siding with corporate jet owners over assistance for children and the health care for the elderly.


White House Proposals
In negotiations led by Vice President Joe Biden that collapsed two weeks ago, the White House had proposed $400 billion in revenue increases, including ending tax breaks for corporate jets and for oil and gas companies and phasing out deductions for taxpayers earning more than $500,000 a year, according to participants, including Maryland Democratic Representative Chris Van Hollen.

Such a high-stakes strategy gambles on Republicans dropping their objections to tax increases at the risk of an inter-party backlash from tax opponents, said Ed Lorenzen, a senior adviser at the Committee for a Responsible Federal Budget, a bipartisan education and policy center in Washington that examines fiscal matters.

“The dangerous part is that everyone seems to be hardening their positions and ramping up their rhetoric,” Lorenzen said. “What’s hard to know is whether this rhetoric is posturing to satisfy the base or, more likely, both sides are really just locking themselves in,” Lorenzen said.

There are few signs that the two sides have bridged their differences since the Biden-led effort fell apart. Obama held one meeting with Senate Minority Leader Mitch McConnell, a Kentucky Republican, on June 27, after which neither side reported any advancement in resolving their differences.

“Over the July Fourth weekend, my team and I had a series of discussions with congressional leaders in both parties,” Obama said yesterday. “We’ve made progress, and I believe that greater progress is within sight, but I don’t want to fool anybody -- we still have to work through some real differences.”



Bloomberg News


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