Reporting from Washington — House Republican leaders are prepared to take the politically unpopular step of raising the nation's debt limit this spring — if the price is right.
Their strategy is to extract steep spending cuts in exchange for acquiescing to the Obama administration's request to increase the debt ceiling beyond its $14.29-trillion limit.
FOR THE RECORD:
Budget debate: An article in the Feb. 8 Section A about the debate in Congress over raising the federal debt ceiling said Sen. Kent Conrad (D-N.D.) was chairman of the banking panel. He is chairman of the Senate Budget Committee. —
The showdown, which will play out over the next several weeks, is a gamble for Speaker John A. Boehner (R-Ohio) as he leads his emboldened but philosophically divided House majority amid Democratic criticism that Republicans are courting economic catastrophe.
Such a compromise may be shunned, even excoriated, by conservatives and "tea party"-inspired lawmakers hesitant to break campaign promises to reduce the debt. They remain reluctant despite GOP advisors' quiet counsel that refusing to raise the limit risks a national financial crisis.
Already, the House's conservative wing has dismissed as inadequate the Republican leadership's proposed spending reductions for the remainder of the fiscal year. Conservatives insist that $100 billion in cuts promised on the campaign trail must be made in the plan coming up for a vote this month, even though the fiscal year is nearly half over.
By holding the debt ceiling hostage to spending reductions, Boehner may be able to achieve an approximation of the GOP's preferred budget cuts that he could not otherwise deliver in a divided Congress.
Democrats, who control the Senate, have dismissed the GOP's call for steep reductions in the annual $3.7-trillion budget, citing economists' concerns that sudden austerity measures could imperil the fragile recovery.
But Democrats are likely to agree on some cuts given the political reality of a Republican-led House. They also see the chance to burnish their voting records on fiscal prudence amid public pressure to rein in government spending. On Monday, a leader of the conservative "blue dog" Democrats in the House, Rep. Mike Ross of Arkansas, said he "would not even consider" raising the debt limit unless it was tied to spending cuts.
The task facing Boehner and the Senate's Republican leader, Mitch McConnell of Kentucky, will be to convince enough lawmakers that the cuts they extract are worth the tough vote to raise the debt ceiling.
"The American people will not tolerate our increasing the debt limit without serious reductions," Boehner said recently. "If the president's going to ask us to increase the debt limit, then he's going to have to be willing to cut up the credit cards."
For decades, Congress has agreed to raise the debt ceiling when federal spending outpaces the limit, albeit not without recriminations. To upend the practice would leave the Treasury Department unable to pay its debt service and obligations — including paychecks for troops and federal workers.
The Treasury Department estimated last week that outlays could surpass the current debt limit by April or May, although the actual date is a moving target dependent on the economy and other factors.
The chairman of the Federal Reserve, Ben S. Bernanke, warned last week that the debt limit was not "something you want to play around with."
He urged Congress "not to focus on the debt limit as being the bargaining chip in this discussion."
Democrats accuse Republicans of engaging in brinksmanship that could cause a government shutdown with severe financial ramifications for the economy.
Although the U.S. has the ability to delay defaulting on its debts by adjusting how it pays its accounts, those measures would be temporary. Economists say default would send interest rates soaring for ordinary Americans and cut off access to capital, upending the markets in a scenario similar to the crisis of 2008.
But under pressure from tea party activists, outspoken Republicans suggest that a default scenario is unduly alarmist.
Newly elected Sen. Pat Toomey (R-Pa.) introduced legislation, with support from 18 other senators, that would require the Treasury Department to make debt payments before other obligations if the ceiling were not raised.
Treasury Secretary Timothy F. Geithner likened Toomey's proposal to a family that paid its mortgage while ignoring credit card payments, insurance premiums and utility bills.
"The world would recognize it as a first-ever failure by the United States to meet its commitments," Geithner wrote the senator.
GOP leaders understand they have little choice but to raise the debt limit. Failing to do so "would be a financial disaster not only for our country but for the worldwide economy," Boehner has said.