WASHINGTON - With tacit support from President Barack Obama, Republicans were moving Wednesday to try to defuse a potential debt crisis with legislation to prevent an economy-rattling fiscal crisis for at least three months.
The legislation marks a tactical retreat by John Boehner, the Republican speaker of the House of Representatives, who is eager to avoid a potential first-ever default on U.S. payment and debt obligations as he wrestles with Obama and his Democratic allies over taxes, spending and the deficit.
Wednesday's legislation would give the U.S. federal government enough borrowing leeway to meet three months' worth of obligations, delaying a showdown next month that Republicans fear they would lose.
It also contains a provision that slaps at the Senate, which hasn't debated a budget since 2009, by withholding the pay for either House or Senate members if the chamber in which they serve fails to pass a budget plan.
Under the U.S. system, the two houses of Congress must pass identical bills before they're sent to the president, who has a limited power to veto legislation. As a result of the checks and balances, the Democrat-controlled White House and Senate and Republican-dominated House need to form a workable compromise.
This "no budget, no pay" idea had previously been regarded by many as a gimmick but has been given new life by Boehner as a "reform" to pair with an increase in the so-called debt limit.
Boehner previously had insisted that any increase in borrowing authority to avoid lapses in payments to contractors, unemployment benefits or Social Security cheques — and possibly even interest payments on U.S. Treasury obligations — be matched dollar for dollar with spending cuts.
Incoming Senate Budget Committee Chairman Patty Murray, D-Wash., announced Wednesday morning that Democrats would indeed advance a budget. She said the announcement had nothing to do with the congressional pay issue. Murray said last year's election proved that the public agrees with Democrats on budget issues like raising taxes on wealthier earners.
House Republicans appeared confident that they'll have the votes to pass the measure even though most Democrats are expected to vote against it because it sets the stage for another potential debt crisis this summer.
But the White House weighed in Tuesday with a statement that the administration would not oppose the measure, even though Obama just last week dismissed incremental increases in the debt ceiling as harmful to the economy.
It also appeared virtually certain that Senate Democrats would accept the bill even though they would prefer a longer-term solution to the debt issue and believe that the "no budget, no pay" provision is silly.
The idea driving the move by Republican leaders is to re-sequence a series of upcoming budget battles, taking the threat of a potentially devastating government default off the table and instead setting up a clash in March over automatic across-the-board spending cuts set to strike the Pentagon and many domestic programs. Those cuts — postponed by the recent "fiscal cliff" deal — are the punishment for the failure of a 2011 congressional deficit-reduction supercommittee to reach an agreement.
These across-the-board cuts would pare $85 billion from this year's budget after being delayed from Jan. 1 until March 1 and reduced by $24 billion by the recently enacted tax bill. Defence hawks are particularly upset, saying the Pentagon cuts would devastate military readiness and cause havoc in defence contracting. The cuts, called a sequester in Washington-speak, were never intended to take effect but were instead aimed at driving the two sides to a large budget bargain in order to avoid them.
But Republicans and Obama now appear on a collision course over how to replace the across-the-board cuts. Obama and his Democratic allies insist that additional revenues be part of the solution; Republicans say further tax increases are off the table after the 10-year, $600 billion-plus increase in taxes on wealthier earners forced upon Republicans by Obama earlier this month.
"We are not going to raise taxes on the American people," Boehner told reporters.
"We feel by moving the issue of raising the debt ceiling behind the sequestration ... that we reorder things in a way that Democrats will have to work with," Rep. John Fleming, R-La., said. "The cuts are the kind of cuts we want, they're just not in the places we want. But they're also not in the places that the Democrats want. So hopefully they'll be forced to come to the table and work with us on a bipartisan basis to put them where they need to be, where it has the less pain."
According to the latest calculations, which account for the recent reduction of this year's sequester from $109 billion to $85 billion, the Pentagon now faces a 7.3 per cent across-the-board cut, while domestic agency budgets would absorb a 5.1 per cent cut. The calculations are not official but were released Tuesday by Richard Kogan, a budget expert with the Center on Budget and Policy Priorities think-tank .
"The sequester is arbitrary, but the fact is that when the sequester goes into effect ... it will have a pretty dramatic effect of people's attitudes here in Washington, and they may get serious about cuts to the mandatory side of the spending equation," Boehner said, referring to benefit programs like Medicare and food stamps, whose budgets essentially run on autopilot.
Republican leaders also have promised conservatives that the House will debate a budget blueprint that projects a balanced federal budget within a decade. For the past two years, the fiscal plans of Budget Committee Chairman Paul Ryan, R-Wis., have contained strict budget cuts but never have projected balance.