(CNN) – Previewing the partisan food fight coming this fall over raising the debt ceiling, the House passed legislation on Thursday allowing the Treasury to pay U.S. bond holders if the nation hits its borrowing limit.
But the vote doesn't move Congress any closer to a deal to address the nation's fiscal situation - it just exposes the bitter divide between the political parties.
The House approved the GOP bill, 221-207, along party lines, with no Democrats voting for it and eight Republicans opposed.
Technically, the limit on federal borrowing will be reached later this month. But because the Treasury can take measures to continue getting loans, most congressional leaders don't expect the debt ceiling to be reached until sometime between September and October.
Economists say continued fiscal uncertainty in Washington over spending, deficits, overall debt, and the now more frequent haggles over raising the debt ceiling, now over $16 trillion, could sap confidence in U.S. economic recovery and slow growth.
Potential negative effects of continued federal borrowing are magnified in the absence of meaningful deficit reduction, experts say, although they acknowledge that defaulting on debt payments is not an option.
One Wall Street ratings house, Standard & Poor’s, cut the gold-plated U.S. credit rating on long term debt when negotiations on raising the debt ceiling went down to the wire in 2011 and rattled markets. Another agency, Fitch, warned in January a that a similar downgrade was possible unless Washington got its fiscal house in order.
Lower credit ratings on debt could potentially impact financial markets and threaten to increase borrowing costs for consumers although interest rates currently are at or near historic lows.
California Republican Tom McClintock, the sponsor of the so-called "debt prioritization" bill, said Wednesday his proposal "makes perfect sense - as a practical matter, a family that's depending on its credit cards to pay its bills had better make sure to pay the credit card bills first. "
But House Democrats slammed the measure and dubbed it the "Pay China first," bill, saying it puts Chinese banks ahead of the U.S. military and others which wouldn't paid if the nation couldn’t borrow any more money.
House Speaker John Boehner essentially verified the Democrats' analysis in an interview with Bloomberg TV earlier this week.
"Those who have loaned us money, like in any other proceeding, if you will, court proceeding, the bond holders usually get paid first. Same thing here," Boehner said.
House GOP aides conceded the measure had virtually no chance of moving forward in the Democratic-led Senate, and the White House already promised to veto it if it came to President Barack Obama’s desk.
Gene Sperling, a top economic adviser to Obama, said this week that the president was stepping up efforts to reach out to congressional Republicans to create conditions for a serious bipartisan agreement addressing the nation’s fiscal situation, but warned the GOP needed to be willing to compromise.
“But, you know, again it takes two to tango,” he said at an appearance at the Pete Peterson Fiscal Summit.
Republican leaders promised they would hold the vote after a push from a bloc of conservatives who wanted to go on record now.
These aides said this vote demonstrated that the GOP was addressing the issue, and could point to it if negotiations and talk about default go all the way up until the deadline.
Democrats maintained Republicans were just playing politics with the nation's credit rating.
"This issue, this legislation is being driven by very narrow bunch on the other side with radical governing philosophy which basically says I hate my government so much that I'm willing to jeopardize the full faith and credit of the United States and bring this economy down until we get our way,” Wisconsin Democrat Ron Kind said
Arkansas Republican Tim Griffin argued on the House floor that GOP was the only party concerned about burgeoning federal deficits.
"We are the ones that are trying to get Washington spending under control so it can live within its means." He called the bill "a backstop that takes default off the table," Griffin said.
This week's House debate served as the opening round of several months of wrangling, both inside the House Republican conference, and with congressional Democrats and the White House over what legislation can pass the divided Congress that will raise the nation’s debt limit.
The last debt ceiling debate in the summer of 2011 was an exceedingly messy process, and starkly illustrated the partisan divide infecting Washington.
Boehner met directly with Obama over months, but failed to reach a deal on comprehensive deficit reduction. Both parties were left scrambling to get votes on a last-minute compromise that left both sides unhappy and kicked the can down the road.
Many House conservatives opposed that deal and criticized Boehner for "backroom negotiations" that left them out of the process.
To prove they are listening to their members House GOP leaders have scheduled a special meeting for next Wednesday just to talk about the way forward on the debt limit.
The two-hour open-mike-style meeting in the Capitol basement will be a chance, according to one House Republican aide, "touch gloves" and demonstrate that all ideas will be explored.
Given the political needle Boehner and other top leaders need to thread on the issue, it's likely this session will be the first of many over the next several months.
Conservatives insist they want additional spending cuts to federal programs without any increases in taxes if they agree to increase the country’s borrowing authority.
With $85 billion in sweeping forced spending cuts from the 2011 debt deal now in effect, congressional negotiators know there is very little room left to cut discretionary programs.
Both sides know the only way to get bipartisan deal involves the GOP giving ceding on some revenue return for Democrats agreeing to significant changes to entitlement programs like Social Security and Medicare.
But for now, House Republicans are simply focused on an internal strategy. One idea is to link the debt ceiling vote with an overhaul of the tax code, a big priority for the GOP.
"We're open to any avenue that leads to tax reform," Sage Eastman, a top aide to Rep Dave Camp, R-Michigan, who chairs the House tax writing panel.
It’s unclear how workable linking fights over popular tax deductions to an already politically complicated issue could happen in a short time frame.
While not quite endorsing that idea, Boehner alluded to that concept of dealing with both issues it at his weekly press conference when asked about how the GOP will approach the debt ceiling fight.
"We also know we can't cut our way to prosperity. We need real economic growth. And that's why you continue to hear a lot of discussion about tax reform, regulatory reform, that would help us produce more economic growth here in our country. We do both, we can begin to solve this problem," Boehner said.
Several House GOP aides say there are other ideas to round up Republican votes, such as attaching the debt ceiling vote to another "must pass" bill like the next continuing resolution to fund the government.
Another option is to combine it with legislation to allow the construction of the Keystone pipeline, an initiative pushed by Republicans that has become an environmental and political flashpoint with the Obama administration.
As is custom on Capitol Hill, it’s unlikely the outlines of any potential compromise will emerge until right before the deadline this fall.
But House Republicans are considering a vote on their own plan as early as July because they know Obama and congressional Democrats will want to use the August summer recess to shape the public debate and pressure them to agree to some new tax increases.
How much money do the Democrats think we can borrow before the whole house of cards (aka our economy and our country) comes crashing down like it has in these other countries?
Will our government be forced to do what they did in Cyprus and confiscate/steal people's bank accounts?
Do they think we can continue like forever, printing money, taking more and more in taxes from fewer and fewer people, reducing our workforce because there are no jobs, and now granting citizenship to 20 million people who will all start competing for fewer and fewer jobs, while giving free healthcare to 30 million others?
Sorry, make that 3 simple questions....
The gop is the problem and the only way to keep the gop conservative garbage from holding the country hostage is to give the house and senate to the dems in the 2014 mid terms . The gop had done enough damage to our economic in the last five years and gop where are the jobs you ran on in 2010. All the jobs we see now are from Obama and the dems,the gop has done nothing but obstruction the economic sence Obama got elected the first term,gop garbage.
Yesterday we read that the deficit has been cut by 32% from last year. I don't see why Democrats should cede any ground, particularly on Social Security, which is not really in trouble. As the economy improves, and as we continue to reduce deficit spending, Republicans' incessant sabotaging of our fiscal responsibilities with political grandstanding starts looking slightly treasonous.
It is amazing to me how ill-educated so many Republicans are. The US has incurred legal obligations under both today's president and previous presidents, most notably George W. Bush. The US government is not a household and cannot be run like a household. If a private citizen defaults on his debts, some creditors will sue him, others will just notify the credit rating bureaus, with the result that his FICO will be lowered and he may not be able to get any more credit, or will be forced to pay substantially more interest on any new borrowings. If the US were to default, and could not borrow additional funds, the entire economy would collapse. These dumb Republicans, with no business experience in the real world do not realize they are playing around with the equivalent of an economic nuclear bomb.
Please see my previous comment regarding the terrible risks that Republicans are taking with respect to America continuing to function economically. The consequences of their folly could be worse for America than the great Depression of the 1930's!
This is scary. It's obviously the groundwork for austerity in America. Get this measure put in place, then, no budget. Shut down the entire government. Republican wet dream- Americans suffer, but creditors get paid.
Borrowing should be limited to 8% of GDP, and not a dime more.
President Obama beats the GOP again.So far this year the deficit is down 32 percent from the same time last year. Through 7 months the deficit has decreased by 231 billion with 200 billion from increased revenue, that is taxes. The CBO is likely to revise their yearly estimate to 750 billion due to a 12.5 percent increase in revenue and 2 million more workers paying payroll/income taxes. Heck, the Treasury Dept even paid 50 billion on the overall debt for the first time in over 5 years. Fannie Mae/Freddie Mac will make a 65.9 billion payment to the treasury in the next couple of months and this is the fastest shrinking of the national debt since WW2. Economists now predict that the nations debt should become sustainable by 2015, that is, it is predicted to be just 2.7 percent of GDP and some see a surplus by 2015. With unemployment coimng down, the Dow at record highs and the fastest decrease of the debt, the GOP's economic arguments and policies are disproved, as if the Great Recession and austerity minded Europe have not already done that, Dems to the rescue once again.
house republicans spend money then blame the president and use debt ceiling as hostage to force t5heir hated sequeters o9n americ
The republicans are talking about economic growth? Its not just because theyre republicans i find this ridiculous its because theyre the same group whose ideas to promote growth in the past have included drastically raising taxes on a family like mine that has 2 kids and makes under 50,000 a yr demolishing the public aid that those tax hikes would force us to seek out getting rid of many regulations that allow for fair employment and pay, ending the minimum wage and almost completely deregulating big business. Put that together with the democrats working right now to deregulate wallstreet and big banks and weve got a real winner on our hands. Those pieces of trash should all be ashamed of themselves
If the House GOP were serious about closing tax loopholes, they would be voting on a tax bill. Instead, they continue to talk, for months now, about doing that.
Congress should have their pay withheld until they pass a balanced budget.
This lady is the GOP's Cindy Sheehan. I'm sorry your son died. There are many reasons why he was in harm's way, and the US could have done more to protect him. But blaming any one person is foolish. How about the 4 million people who were wrongly foreclosed upon and lost their homes? There's no bank exec stepping up and accepting responsibility for that. Their lives are ruined, too, but in a different way.
Never again will we Democrats sign up for another REPUBLICAN sequester. Let the Tea Party lunatics run us off a fiscal cliff. President Obama has been receptive to moderate – even conservative – ideas , yet Republicans have even defeated their own deficit plans AFTER the president has endorsed them. The problem isn't the deficit (which, by the way, is actually shrinking) but a personal and very ugly undertone of the Republicans against the man who current sits in the White House.
Will our government be forced to do what they did in Cyprus and confiscate/steal people's bank accounts?
Well, as they say there are two sides to the story.
First, the economy is doing much better than 5 years ago, and tax revenues are up just on that basis. The Deficit is oing down at a healthy rate. The Makets are up and home sales and prices are up. That will all contribute to getting the U.S. financial house in order. The GOP hoever is still giving the rich a free pass. Tax rates for the wealthy are still well below 2000 levels (when we lsat had a surplus), and with Republican's just achin' to go to war again, you can see they still really don't give a tinker's damn about the American economy,the American worker, the debt or the deficit. The balance in this equation IS still taxation. Corporations are getting a free run with no taxes and big subsidies, and so are the rich. Until that's fixed the problem will remain.Trickle down economics and the wish for jobs from the rich if we give them more breaks hasn't worked and never will. Austerity has failed in Europe, and it won't work here. The GOP can wish for impoverishing the elderly by slashing Social Security, they can wish for taking healthcare away from the poor and elderly, they can wish for the end of public education, and they can wish for Santa Claus if they like. Amercia isn't going back to 1850.
The GOP is little better than a roadblock to a better life for America- time to move them.