Elected officials still seem locked into their negotiating positions on the federal debt limit, leading Moody’s to warn that it could soon consider downgrading the government’s credit rating “due to the very small but rising risk of a short-lived default.”
The Treasury projects that without congressional action, the government will exhaust its borrowing authority on Aug. 2.
“Although Moody’s fully expected political wrangling prior to an increase in the statutory debt limit,” the ratings agency said Thursday, “the degree of entrenchment into conflicted positions has exceeded expectations.”
Robert L. Bixby, executive director of The Concord Coalition, writes in a recent blog post that Republicans “have chained themselves to a rigid negotiating position” against tax increases, even when accompanied by substantial spending cuts. Meanwhile, Senate Democrats have rejected four budget plans while clinging to “the safety of silence” by failing to offer their own alternative.
“Picture a stone wall negotiating with a blank slate,” Bixby writes. “It is hard to imagine how this can lead to a fruitful negotiation.”
The House last week held a symbolic vote against the idea of a “clean” debt limit increase, meaning one without any provisions for deficit reduction. President Obama later held separate meetings with House Republicans and House Democrats.
Debt limit negotiations between administration officials and top lawmakers are scheduled to resume this week. These talks, chaired by Vice President Joe Biden, have reportedly identified substantial spending cuts. Bixby warns, however, that “familiar obstacles” such as differences over taxes and Medicare reform remain.
It is unclear whether a small bipartisan “gang” of senators can make further progress on a broad, long-term plan for fiscal reform with one of the group’s key Republicans on what he has described as a “sabbatical.”
External links:
Moody’s Announcement: Rating Implications of U.S. Debt Limit, Long-Term Budget Negotiations
Treasury Statement Reaffirming Aug. 2 Deadline
Op-Ed by Erskine Bowles and Alan Simpson on “Gang of Six”
Summary of Republican Study Committee Letter to House GOP Leadership
Letter From Five Senate Democrats Opposing Negotiations Over GOP Medicare Plan
