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When Congress returns Monday from its summer break, lawmakers must quickly forge a deal to avoid a government shutdown and then pivot to raise the government’s borrowing authority by mid-October or face a damaging U.S. debt default.
Those fights were complicated enough before President Obama announced he’d seek congressional approval for a military strike against Syria. Now, the Syria debate eats into what little time is available for a budget deal. And that’s on top of a more complicated political and fiscal landscape than a year ago, including huge differences in competing spending plans, a changed tax landscape and new political calculations.
The fiscal year ends on Sept. 30, with the government having spent about $3.45 trillion, just a tad lower than spending in 2010. Absent some sort of a deal to fund government starting Oct. 1, there could be a shutdown.
During the last budget battle, the Republican-led House of Representatives and the Democrat-led Senate were about $29 billion apart in their proposed spending plans. This time they are $91 billion apart.
‘A whale of a fight’
Lawmakers might opt instead to continue government spending on a temporary basis to avoid a shutdown. That would likely leave in place the so-called budget sequester and the scheduled $109 billion of new across-the-board cuts in federal spending in the coming fiscal year.
Just days later, another crisis looms. Treasury Secretary Jacob Lew sent a letter on Aug. 26 to congressional leaders warning that the government will hit the $16.39 trillion debt ceiling — the cap on the federal government’s borrowing authority — around the middle of October. The government would then be unable to borrow to pay all the bills already racked up. That would trigger a default and a lowering of the U.S. government’s credit rating, raising the cost of future borrowing and potentially sparking financial turmoil. House Speaker John Boehner, R-Ohio, has promised “a whale of a fight” over raising the debt ceiling, insisting on spending cuts or reforms equal to or greater than the amount of any new borrowing allowed.
‘Made things more difficult’
One complicating factor is that the last budget deal, on New Year’s Day, now clouds the current talks, said Maya MacGuineas, president of the Committee for a Responsible Federal Budget, which advocates for lower deficits and debt.
The deal raised taxes on the wealthiest Americans and extended jobless benefits for 2 million long-term unemployed. Republicans who agreed to the tax increase then are unlikely to do so again. “It’s made things more difficult,” MacGuineas said.
Returning lawmakers have about three weeks to come up with a budget for the fiscal year that begins Oct. 1.
“Suffice it to say that threatening to shut down the government would have a terrible impact on our economy,” said White House spokesman Josh Earnest. “Threats to shut down the government would only undermine the economic recovery that’s starting to gain some traction.”
With congressional leaders dug in, a solution may have to come from Rep. Paul Ryan, R-Wis., chairman of the House Budget Committee, and Rep. Chris Van Hollen of Maryland, the committee’s top Democrat. For now, Ryan, viewed as a top-tier GOP presidential candidate, is sticking to familiar themes. “Chairman Ryan believes we need to give real relief to American families,” said William Allison, Ryan’s spokesman. “This fall, he’s hopeful we will delay Obamacare, pay down the debt and help grow the economy.”
Van Hollen said there have been no back-channel talks with Ryan and pointed to deep divisions in the House Republican caucus. “They’ve got no authority from their caucus to negotiate anything,” he said. “They can’t deliver.”