Everyone agrees that the nation is coming up against the $16.7 trillion debt ceiling. The debate is over when that will happen, and what comes next.
WASHINGTON — Republican lawmakers are voicing increasing skepticism about dire warnings that failing to raise the debt ceiling would result in catastrophic default.
"I would dispel the rumor that is going around that you hear on every newscast, that if we don't raise the debt ceiling, we will default on our debt," said Sen. Tom Coburn, R-Okla., Monday on CBS This Morning. "We won't. We'll continue to pay our interest."
Coburn and other Republicans argue that the Treasury Department could prioritize interest payments while delaying others. The House has passed a bill requiring the Treasury to do just that.
"I think one of the things that's been so disturbing about this period is that you've actually had the House leadership pass proposals to implement how you would do prioritization, as if that would be an acceptable solution. It is not acceptable. Prioritization is default by another name," said Gene Sperling, director of the National Economic Council, at a Politico breakfast Monday. He said President Obama prefers a long-term raise in the $16.7 trillion debt limit, but did not rule out support for a short-term increase.
Washington's attention is turning to the debt limit even as it enters its second full week of a partial shutdown caused by Congress' inability to pass a spending bill. Although most of the 350,000 civilian Defense employees are going back to work this week, more than half a million federal workers remain furloughed. The House voted Saturday to give all federal workers back pay, but the Senate has yet to schedule a vote on the measure.
It's increasingly likely that a bill ending the shutdown will be packaged with a measure to raise the debt limit. But House Speaker John Boehner, R-Ohio, is seeking budget cuts from the White House as part of that measure.
The White House says it wants a "clean" debt limit increase, and that it must happen by Oct. 17. That's the day Treasury Secretary Jacob Lew says the United States would run out of borrowed money, putting the government in uncharted territory and creating the prospect of a first-ever default.
But some Republicans aren't buying it.
"I will hear language like, 'Well, we are heading toward the debt ceiling and you are going to default.' Anyone that says that is looking you in the eyes and lying to you, either that or they don't own a calculator," Rep. David Schweikert, R-Ariz., said in a House debate Friday.
And Rep. Ted Yoho, R-Fla., even argues that reaching the debt limit could help the economy, by showing the world the U.S. is serious about its debt problem. "I think, personally, it would bring stability to the world markets," he told The Washington PostMonday.
"The bottom line is, Treasury has the ability to manage that, so the date is whatever Secretary Lew claims the date will be," said Rep. Jeb Hensarling, R-Texas.
White House officials concede there's some truth in that. The government will still have $30 billion in cash on Oct. 17, plus whatever tax receipts come in each day. "You'll have days, not weeks, until you deplete that money and you default," said Jason Furman, chairman of the Council of Economic Advisers, at the Politicobreakfast. "It's irresponsible to get to the 17th — but no, you don't fall off a cliff instantly."
The Treasury Department says even approaching the debt limit could rattle the markets and result in increased borrowing costs.
Veronique de Rugy, an economist at the free-market Mercatus Center at George Mason University, said the debt ceiling will have to be raised sooner or later — and Republicans should know that.
"I do not believe that past Oct. 17 the country's going to hell," she said. "But I agree that failing to pay interest on our debt has very serious consequences. And there's no budget out there that doesn't require us to raise the debt ceiling. If Republicans put a balanced budget proposal out there, they would have a lot more credibility in my eyes."