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| President Barack Obama speaks during his final news conference of his first term in the East Room of the White House in Washington, Monday, Jan. 14, 2013. |
WASHINGTON
(AP) -- Declaring "we are not a deadbeat nation," President Obama warned
on Monday that Social Security checks and veterans' benefits will be
delayed if congressional Republicans fail to increase the government's
borrowing authority in a looming showdown over the nation's debt and
spending.
Obama said he was willing to
negotiate deficit reduction with GOP leaders but insisted that those
talks be separate from decisions to raise the $16.4 trillion debt
ceiling and avert a possible first-ever national default.
"They
will not collect a ransom in exchange for not crashing the American
economy," Obama said in a news conference one week before he is sworn in
for a second term. "What I will not do is to have that negotiation with
a gun at the head of the American people."
Bitter
brinkmanship between the White House and congressional Republicans over
spending has become a defining event over the past four years, testing
both Obama's leverage and his resolve at different moments of his
presidency. House Speaker John Boehner brushed off Obama's insistence on
separating the debt ceiling from negotiations over spending cuts.
"The
American people do not support raising the debt ceiling without
reducing government spending at the same time," Boehner said. "The
consequences of failing to increase the debt ceiling are real, but so,
too, are the consequences of allowing our spending problem to go
unresolved.
Underscoring the urgency, Treasury
Secretary Timothy Geithner said in a letter to Boehner on Monday that
the government will exhaust its borrowing limit as soon as mid-February,
earlier than expected. The Treasury has been using bookkeeping
maneuvers to keep from surpassing the debt ceiling, but Geithner said
those measures will be exhausted by mid-February to early March.
In
addition to noting possible effects on older Americans and veterans,
Obama recited a litany of possible consequences if Congress fails to
raise the debt ceiling, including sending the economy back into
recession.
"We might not be able to pay our
troops, or honor our contracts with small business owners," he said.
"Food inspectors, air traffic controllers, specialists who track down
loose nuclear materials wouldn't get their paychecks. Investors around
the world will ask if the United States of America is in fact a safe
bet. Markets could go haywire, interest rates would spike for anybody
who borrows money. Every homeowner with a mortgage, every student with a
college loan, every small business owner who wants to grow and hire."
At
this moment, the government faces three looming deadlines: The debt
limit must be raised soon to meet spending obligations and prevent a
first-ever default, a series of across-the-board spending cuts is to
kick in on March 1, and funding for most government programs will run
out on March 27.
After Obama won tax rate
increases for wealthier Americans during budget negotiations last month,
Republicans became doubly determined to win spending cuts. They see the
confluence of events ahead of April 1 as their best opportunity.
Just
weeks from hitting the first of the deadlines, the two sides are
neither on the same page nor pursuing a common approach. In 2011, Obama
and Boehner at least started off agreeing on the premise that the
increase in the debt limit be matched dollar-for-dollar with deficit
cuts, spread out over a decade. Obama ultimately won a $2.1 trillion
debt increase, but only after agreeing to an equal amount of spending
cuts over 10 years.
This time, White House
officials believe the president has a stronger hand, having won
re-election and, at least partially, the tax increases on which he had
campaigned.
Eager to avoid blame for a default
or for missed payments to seniors, some Republicans are getting ready
to insist on certain payment priorities by the Obama administration if
the debt ceiling is not raised in a timely manner.
Even
without additional borrowing authority, the government would continue
to receive tax revenue, but hardly enough to keep up with the bills.
Sen.
Patrick Toomey, R-Pa., says he will introduce legislation next week
that would require the government to pay interest on the debt as well as
Social Security benefits and wages for active duty members of the
military if the borrowing limit is not raised.
"Because
the people who want to keep spending as usual and don't want to
negotiate some spending reductions are out there propagating this myth
that somehow failure to raise the debt ceiling would result in a
default, I felt like it's necessary to demonstrate and, in fact I prefer
to codify, the alternative," Toomey said in an interview.
Congressional
Democrats have recently urged the president to lift the debt limit
unilaterally. He said - as he has before - that he won't do it, that
Congress has voted for the spending that resulted in federal borrowing,
and should now agree to pay the bill.
"There are no magic tricks here," Obama said Monday. "There are no loopholes. There are no, you know, easy outs."
Obama
noted that combined with other legislation he signed earlier in his
term, he and Congress have reduced deficits by about $2.5 trillion over a
decade, short of the $4 trillion he said is necessary to get them down
to a manageable size.
He insisted that in
negotiating deficit reductions, both spending limits and tax revenue
increases need to be on the table. Aides have said that closing
loopholes and placing limits on deductions could generate about $600
billion in new revenue. He added that he is "open to making modest
adjustments to programs like Medicare to protect them for future
generations."
One option for Boehner is to
package a debt limit increase together with a full catalog of spending
cuts and try to pass it through the House. That could prove enormously
challenging since he would have to accomplish the feat exclusively with
GOP votes - and some conservative hard-liners simply refuse to approve
any debt increase.
Boehner has made it clear
that he's eager to avoid a first-ever default on U.S. obligations - even
if some Republicans aren't afraid of the idea.
In
one sign of flexibility, a Boehner spokesman says that though there is
the so-called Boehner Rule requiring $1 in spending cuts for every $1 in
increased authority to issue government debt, the speaker is willing to
apply it more leniently to include savings from "reforms" to
entitlement programs like Medicare and Social Security that accrue over
the long term.
Obama has his doubters, who note that he has compromised before in the face of last-minute deadlines.
Asked
during the news conference how steadfast he was, Obama replied: "We've
got to break the habit of negotiating through crisis over and over
again. Now is as good a time as any, at the start of my second term.
Because if we continue down this path, then there's really no stopping
the principle."
