On Monday, the seventh day of the government shutdown, House Speaker John Boehner refused to budge on bills to reopen the government or raise the debt ceiling without the Obama administration negotiating on ways to trim the deficit.
Meanwhile, a senior White House official said Monday that President Barack Obama would accept a short-term increase in the federal borrowing cap, rather than one lasting a year or more.
But Obama said that he would not negotiate on fiscal matters until the debt ceiling was raised and the government reopened.
“We’re not going to negotiate under the threat of economic catastrophe,” Obama told federal workers at the Washington headquarters of the Federal Emergency Management Agency, according to Bloomberg.
Some GOP House members are urging Boehner to resurrect the so-called “Boehner Rule,” which demands that any increase in the debt limit be accompanied by equal or larger reductions in spending, according to Paul Van de Water, a senior fellow at the Center on Budget and Policy Priorities.
Van de Water says in an Oct. 4 blog post that such calls to resurrect the Boehner rule are “cause for serious concern.” Following this rule, he says, “would impose an extremely onerous — and unnecessary — budget goal, and ultimately have devastating consequences,” as “this rigid formula would require additional spending cuts in any year in which the debt grows in dollar terms, even if the debt is stable or shrinking in relation to the economy.”
Under the formula, Van de Water continues, “programs that strengthen economic growth or serve low- and middle-income Americans could be cut to allow the debt ceiling to be raised, but savings from curbing special-interest tax breaks would not count for this purpose.”
While the nation is hurtling toward an Oct. 17 debt limit deadline, some independent analysts told The Washington Post that the real deadline is likely Nov. 1, when the Treasury Department is scheduled to make nearly $60 billion in payments to Social Security recipients, Medicare providers, civil-service retirees and active-duty military service members.
Political strategist Greg Valliere of Potomac Research noted in his Monday commentary that if Nov. 1 is really the drop-dead debt ceiling deadline, then “you can be certain this crisis will persist until Halloween.”
While Valliere says that the financial markets “aren’t worried about a default crisis,” and that he isn’t either, as “we agree that a default is extremely unlikely (but not totally out of the question),” the “bigger concern is the corrosive impact of the shutdown on the economy, which will intensify in the coming days.” Labor numbers, too, are on hold until the shutdown is lifted. The Bureau of Labor Statistics failed to release its usual monthly jobs report on Friday “due to the lapse in funding.” BLS said that only three employees are now working, down from the usual 2,400. After the government reopens, Labor will need three days to process the report, CNBC reporter Steve Liesman tweeted.
Meanwhile, the Senate Banking Committee plans to hold a hearing Thursday titled “Impact of Default on Financial Stability and Economic Growth.” Those testifying include Frank Keating, President and CEO, American Bankers Association; Ken Bentsen, President, Securities Industry and Financial Markets Association; Gary Thomas, President, National Association of Realtors; and Paul Schott Stevens, President and CEO, Investment Company Institute.
Check out Sweat the Debt, Not the Shutdown by Ron DeLegge on ThinkAdvisor.