Default Risk Widens Rift within Republicans

WASHINGTON & SANTA FE, NM (By Kathleen Hennessey and Peter Nicholas, LAT) July 14, 2011 — The once-vaunted unity of congressional Republicans has become a distant memory, crumbling under the pressure of the deadline to raise the government's credit limit.

As the internal fissures widened and another White House meeting ended inconclusively, the economic stakes rose. Moody's Investors Services said Wednesday it had placed the U.S. government's AAA bond rating on review for possible downgrade because of the possibility that the debt limit "will not be raised on a timely basis, leading to a default on U.S. Treasury debt obligations."

Federal Reserve Chairman Ben S. Bernanke warned in congressional testimony that failure to raise the government's debt limit by Aug. 2 would be a "huge financial calamity."

And Senate Minority Leader Mitch McConnell (R-Ky.) issued a political warning that the party risked losing the next election if Republicans persisted on their current path.

So far, such warnings have had little impact in the House of Representatives, where many members of the Republican majority, particularly newly elected "tea party" conservatives, have vowed to let the government default on its bills rather than vote for any debt ceiling increase. House GOP leaders have said they will vote for an increase only if it is accompanied by a balanced budget amendment to the Constitution, deep cuts to Medicare, or other spending restrictions that President Obama has rejected.

"Currently, there is not a single debt limit proposal that can pass the House," Majority Leader Eric Cantor (R-Va.) said in a statement Wednesday morning. Cantor has been at odds with McConnell and House Speaker John A. Boehner (R-Ohio) in the last several days.

In a radio interview with conservative commentator Laura Ingraham, McConnell said the economic impact of a default would give Obama an opening to blame the GOP for the country's bad economy.

"Look, he owns the economy," McConnell said. "We refuse to let him entice us into co-ownership of a bad economy."

McConnell had offered his own "backup plan" Tuesday to end the stalemate — a proposal under which Congress would essentially surrender power to raise the debt ceiling and hand responsibility solely to Obama. He was excoriated by many conservatives in his party.

"Wow. Stupid idea," was the tweet from Rep. Jason Chaffetz of Utah.

McConnell fired back Wednesday, saying Republicans who think that the public will support them in the event of a government default were disastrously wrong. Default "destroys your brand," he said.

"We know that's going to happen. Just like we knew shutting down the government in 1995 was not going to work for us," he said. The 1995 shutdown "helped Bill Clinton get reelected," he said. "I refuse to help Barack Obama get reelected."

Some Republicans said the party had raised expectations by insisting it would not approve a debt ceiling increase without drastic cuts, program changes and budget reforms.

"Our problem is we made a big deal about this for three months," said Sen. Lindsey Graham (R-S.C.). "We've got nobody to blame but ourselves. We shouldn't have said that if we didn't mean it."

Others remained either unconcerned about McConnell's political anxiety or unconvinced by his logic. Many of the 87 freshman Republicans in the House see the mission to cut spending as their sole mandate.

"I did not come here to get reelected," said Rep. Chip Cravaack, a freshman from Minnesota.

Boehner acknowledged this week that more than 60 of his members were unlikely to support any deal. Many of them say they are nonplussed by the political risks of potential default.

Other Republicans argue that their leaders, by conceding there are risks in failing to increase the borrowing limit, have been hoodwinked by the White House. These Republicans dispute Obama's warnings that Social Security checks and other obligations may go unpaid.

"I would encourage the speaker not to believe the president anymore when he says things like that," Rep. Louie Gohmert (R-Texas) said Wednesday at a news conference organized by Rep. Michele Bachmann.

In another sign of division, Bachmann, running for the GOP presidential nomination, said she would vote to raise the debt ceiling only if the deal repealed the president's healthcare law.

But even Cantor, who has lined up with conservatives in his chamber, ruled out that possibility.

The Republican disarray contrasts with a tradition of GOP unity and discipline, having the effect of making Democrats appear nearly unified. But many Democrats are as anxious about where the White House is headed with debt negotiations.

Beleaguered liberals are perturbed by Obama's eagerness to cut a deal even it means changes to entitlement programs.

"It shows a willingness to throw us under the bus, politically speaking," said Rep. Raul Grijalva (D-Ariz.).

Obama's supporters believe that he'll emerge from the high-stakes talk with his reputation intact as someone who isn't motivated by political calculation. They see his willingness to retool Medicare and Social Security programs as proof that he will assume political risk if it is in the country's interest.

Bill Burton, a former White House press aide, said that Obama "showed a willingness to do something that obviously antagonized even his closest allies in order to move forward."

But one liberal group has organized an Internet petition to leave entitlement benefits intact. Adam Green, cofounder of the Progressive Change Campaign Committee, said Wednesday that 200,000 people had pledged to neither donate to Obama nor volunteer for his campaign if he allowed cuts to Medicare, Social Security or Medicaid.

Meanwhile, the chairman of the Congressional Hispanic Caucus, a constituency Obama cannot afford to alienate, called on the White House and congressional negotiators to avoid cuts to programs that are part of the basic social safety net.

Rep. Charles Gonzalez (D-Texas) laid out the importance of the major entitlement programs to Latino constituents and warned that the debt ceiling debate had to be solved "without devastating cuts to Social Security, Medicare and Medicaid."