Why debt limit issue may drag on through Election 2012

House Speaker John Boehner’s call for trillions in federal spending cuts as a condition for increasing America's $14.3 trillion debt limit just raised the bar for budget talks between congressional leaders and the White House, set to resume Tuesday – a move likely to keep the debt limit issue running through the 2012 election.

Allowing the United States to default on its debt would be “irresponsible,” Speaker Boehner told the Wall Street financiers' Economic Club of New York on Monday. “But it would be more irresponsible," he said, "to raise the debt ceiling without simultaneously taking dramatic steps to reduce spending and reform the budget process.”

In laying down his marker, Boehner signals to the White House that Republicans will exact a high price to raise the debt ceiling, to be paid off in spending cuts, not tax increases. With Democrats rejecting cuts to Social Security and Medicare, there's little left that could deliver the trillions in cuts. One alternative is to pass short-term debt-limit deals, each accompanied by spending cuts, until Americans weigh in on the issue in 2012 elections. Another is that Congress adopts dramatic structural moves to overhaul the budget process such as passing a balanced budget amendment to the Constitution – a long process that also would be certain to run through the 2012 election.

“If you can get a balanced budget amendment out of the Senate, you redefine the 2012 election,” says Michael Franc, vice president for government studies at the Heritage Foundation. Most Americans favor a balanced budget amendment, but balk when faced with the specific cuts needed to achieve a budget in which expenditures equal revenues.

For Congress, the debt limit is the ultimate pressure point for a House facing a president of the opposite party. The US Treasury estimates that the US will breach that limit on May 16, but can use accounting devices to extend that deadline until Aug. 2.

It will be a must-pass bill, and rank-and-file Republican lawmakers – as well as outside conservative groups – aim to hang as much on it as they can, including measures to defund President Obama’s health-care reform, mandatory spending caps, or a constitutional balanced budget amendment.

Some tea party groups oppose any hike in the debt limit, period. In Washington on Monday, tea party leaders announced the opening day of “RINO hunting season” (Republicans in Name Only) and blasted Boehner for conceding too much in previous budget negotiations with the Obama White House.

“As the GOP primary season opens, if House freshmen and others elected by the tea party cave to Obama, we will find replacements for them,” said William Temple, chairman of the Tea Party Founding Fathers. “We will be judging on just one issue only: Did you vote for more debt?”

As he did with the fiscal year 2011 budget negotiations earlier this year, Boehner is consulting with caucus members and outside groups and encouraging a wide vetting of views. Last week, House Budget Committee chairman Paul Ryan (R) of Wisconsin and Ways and Means Committee chairman Dave Camp (R) of Michigan said Congress is not likely to succeed in including entitlement reforms, such as scaling back Medicare, in a grand bargain on the debt limit. Boehner says nothing is yet off the table, except tax increases.

The Democrats' negotiating position has been to protect entitlements such as Social Security and Medicare, while increasing taxes on the wealthiest Americans and certain industries, such as oil – themes for campaign 2012. Mr. Obama and Senate majority leader Harry Reid initially pushed for a clean debt-limit vote, with no add-ons. But they came under fire from the business community for not taking the debt crisis seriously enough. In April, Senator Reid called for a mandatory cap on deficits.

For Republicans, that’s code for tax increases. “We should be talking about cuts of trillions, not just billions,” Boehner said on Monday. “They should be actual cuts and program reforms, not broad deficit or debt targets that punt questions to the future.”

Aides say that does not mean Boehner is repudiating long-term reforms, such as a balanced budget amendment. The amendment could be part of a final deal on the debt limit, but it can’t substitute for a solid agreement on verifiable spending cuts, they say. A balanced budget amendment “won’t take effect for years,” says Boehner spokesman Michael Steel, in an e-mail. “And triggers based on debt or deficit levels will just result in tax hikes down the line.”

But the appeal of procedural solutions to the debt-limit problem – such as a constitutional balanced budget amendment and spending or deficit cap – is surging on both sides of the aisle. With a deeply polarized Congress and divided party control of the House and Senate, plans that solve the debt crisis by mainly raising taxes or mainly cutting spending won’t have the votes to prevail.

“Polls for years have said, 'don’t touch Medicare,' so the [House] vote on Medicare [calling for transforming it into a subsidy program] is likely to be as damaging to Republicans as health care [reform] was to Democrats,” says Stan Collender, a congressional budget analyst, now with Qorvis Communications.

The way out for embattled congressional leaders is to propose actions that would result in the nation's bottom line changing by trillions, without specifying precisely how that will be achieved, he adds. “The best you’re going to be able to hope for now is a change in the budget process," and let a future Congress decide how to change it, he says.

Sens. Bob Corker (R) of Tennessee and Claire McCaskill (D) of Missouri are building bipartisan support for spending caps. On Monday, the liberal activist group Moveon.org released a letter by 75 economists dubbing such a measure “nothing less than a Medicare kill switch,” because it would inevitably demand huge cuts in entitlements.

All 47 Senate Republicans are on record backing a proposal by Sen. Mike Lee (R) of Utah for a constitutional balanced budget amendment. Eleven Senate Democrats have voted to support the idea in principle. But it would require a two-thirds vote in both the House and Senate, plus three-quarters of the states, to become law.