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Short-Term Debt Ceiling Increase a Strategic Move for GOP – Money Morning

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Republicans this week will vote on a short-term debt ceiling increase that gives Washington three more months to agree on budget cuts.

The GOP would approve the short-term increase with the requirement that both the House and Senate pass a budget before the new deadline – or fail to get paid.

The move, according to Republican party strategists speaking to The Washington Post, was designed to give the GOP leverage in the spending cuts fight that will begin in March.

“Republicans have to do a better job of picking our fights,” one prominent Republican consultant told The Post. “So, we need more concern about the impact of Obama’s reckless spending before we fight with a guy who controls the bully pulpit.”

Debates over what to do about the automatic spending cuts, or sequestration, will start before the new April 15 debt ceiling deadline. Republicans want drastic spending cuts, but if Congress can’t agree, then deep across-the-board cuts will go into place anyway. Democrats will have to compromise if they want budget cuts other than the sequester.

The GOP compares this to the president’s position in the fiscal cliff fight, when Democrats wanted tax hikes on the rich.

“In the fiscal cliff fight, the president had greater leverage because current law was on his side,” a House Republican aide told The Post, noting that if nothing was done on the cliff taxes would have gone up on all Americans. By contrast, the aide added, “in the sequestration fight, we have greater leverage because current law is on our side.”

Will Debt Ceiling Increase Lead to Senate Budget?

Republicans think this strategy will get the Democrat-led Senate to finally pass a budget for the first time in four years.

“We are going to pursue strategies that will obligate the Senate to finally join the House in confronting the government’s spending problem,” Rep. John Boehner, R-OH, said at a speech at a GOP retreat last week.

As for docking the Senate’s pay if it does not adopt a budget, he said, “the principle is simple: No budget, no pay.”

Sen. Chuck Schumer, D-NY, on “Meet the Press” Sunday said Democrats will use the new budget as a way to incorporate tax changes into the country’s fiscal reform.

“In our budget that we will pass, we will lift tax reform, which many of my Republican colleagues liked, but it’s going to include revenues,” Schumer told the program. “It’s a great opportunity to get us some more revenues to help in part deal with sequestration and deal with the debt issue.”

Debt Ceiling: Who the GOP Would Pay First

Republicans this week are also slated to introduce a stop-gap measure that would prioritize government payments if the country were to ever hit the debt ceiling.

Thirty senators, led by Sen. Pat Toomey (R-PA), will introduce this week the “Ensuring the Full Faith and Credit of the United States and Protecting America’s Soldiers and Senior Act.”

The bill suggests a stop-gap should Congressional leaders fail to raise the debt ceiling. Those who could expect to be paid first under such a scenario are holders of U.S. debt (bond holders), Social Security recipients and active-duty military personnel.

The bill also authorizes the Treasury to raise the debt ceiling just enough to cover these pertinent payments should there not be enough cash in the government’s kiddy.

The new bill is similar to legislation the same bunch proposed in July 2011, during the nation’s last debt ceiling debacle. However, this year’s bill permits the Treasury to raise the debt ceiling to make select priority payments.

But the White House isn’t expected to like any proposal that hints at the possibility of default.

“Choosing whether you pay Social Security beneficiaries, or combat troops in Afghanistan, or veterans who depend on the VA for benefits, or bond holders — these are choices about default,” White House press secretary Jay Carney said Thursday.

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