Treasury Secretary Jacob Lew sent a letter to Speaker John Boehner, R-Ohio, Monday informing him that the Treasury Department has exhausted available “extraordinary measures” to fund federal government spending without increasing the nation’s current borrowing limit, and that by mid-October, Treasury will not be able to guarantee that all of the federal government’s financial obligations will be met. Such an event “would cause irreparable harm to the American economy,” warned Lew.
The mid-October date identified by Lew is months ahead of whenmany people expected the current debt limit to be breached. The new timing essentially combines the need for Congress to re-authorize government spending for the next fiscal year (the Continuing Resolution that must be signed by Sept. 30) with the need to authorize enough new borrowing to pay for it (the debt limit).
A distinction without a difference
Boehner, and the rest of the House leadership, have been saying for weeks that they would not seek any spending or policy changes while approving new spending authorization. Instead, they promised to force President Obama to agree to new spending cuts and reforms while approving new borrowing authorization. Now that those deadlines are falling on essentially the same days, there is no difference between the strategies. Everything will be on the table as soon as the House gavels back into session Sept. 9.
A menu of options
Obama has repeatedly said he will not negotiate over the debt limit, but has always been open to negotiations over spending levels for the next fiscal year. Combining the two events essentially allows Obama to negotiate on both, while making it seem as though he is keeping his promise not to negotiate on the debt limit.
On the other side, House Budget Committee Chairman Paul Ryan, R-Wis., is reportedly preparing a “menu” of options that could be presented to Obama, each of which would correspond to increasing the debt limit for a certain amount of time.
But whatever menu Ryan makes may not have the full backing of enough House Republicans to make the offer credible. If House Republicans stay divided heading into this spending/debt fight with Obama, they could risk losing big.
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