President Barack Obama warned Wednesday he would reject any deal to end a looming fiscal crisis that let Republicans wield new leverage next year over lifting the cap on government borrowing.
Obama staked out his position after the New York Times reported that Republicans may bow to his demand to hike taxes on the rich, but renew their spending cuts crusade when Obama asks for the debt ceiling to be raised.
“We are not going to play that game next year,” Obama told prominent CEOs at the Business Roundtable in Washington.
“That is a bad strategy for America, it is a bad strategy for your businesses and it is not a game I will play.”
The Times reported that Republicans locked in a showdown with Obama over a year-end “fiscal cliff” crisis, were looking for a fallback position to navigate away from a tough political spot.
It said that if they cannot stop Bush-era tax cuts expiring at the end of the year, Republicans may vote to extend relief for the middle class but not the rich — effectively conceding Obama’s position.
But they would then renew the battle by demanding steep cuts in spending on social programs in return for voting to raise the government’s statutory borrowing limit due to be reached early next year.
Obama insisted that he would not allow a repeat of the crisis last year, when the United States came perilously close to defaulting on its debts as Republicans sought deep spending cuts in return for more government borrowing.
Every time the US government comes up against its spending limit, Congress has to vote to raise it so Washington can service its debt. A US default could trigger global economic contagion.
The Treasury says the United States will hit its statutory borrowing limit near the end of the year, but says it can take emergency measures to push off the moment of crisis for a few months.
The country’s current debt is around $16.2 trillion, and continued borrowing needs to finance the budget shortfall will send the government past the fixed $16.39 trillion level.
The White House has proposed a new scenario which would allow the president to raise the debt ceiling on his own — a plan Republicans have rejected outright.
The president insisted on Tuesday that there would be no deal on averting the fiscal crisis — a combination of automatic tax increases and huge spending cuts — without a rise in the top income tax rate for the richest Americans.
Republicans have said they are ready to raise revenues — but only through closing tax loopholes and capping deductions — a solution Obama says will raise insufficient funds to make a significant impact on the deficit.
Obama rules out new debt ceiling showdown
