What’s happening instead is deficit reduction achieved in fits and starts. Democrats see a multi-stage game where they lost badly in 2011 and have now recovered their footing to insist on pairing tax increases with spending cuts.
In 2011, using the debt ceiling as leverage, Republicans got Obama to agree to more than $1 trillion in spending cuts plus another $1.2 trillion still set to start this year.
A 2011 deficit-reduction supercommittee deadlocked, pushing the issue into the 2012 election. Democrats were able to prevail only after Obama won a second term campaigning on tax increases, while Democrats gained seats in the House and Senate.
Republicans, particularly in the House, want to insist on spending cuts at every turn. Although they failed in this round, they drove that argument in last year’s debt-ceiling fight, and they will replay it in the next few weeks.
The U.S. hit the debt limit Dec. 31 and the Treasury Department began employing so-called extraordinary measures to finance about $200 billion in deficits in 2013.
A debt limit increase will be needed as early as mid- February, according to the Congressional Budget Office, and the automatic spending cuts will start taking effect March 1.
Last night Obama said he won’t “have another debate with this Congress over whether or not they should pay the bills they’ve already racked up.”
Republicans want to replay their demand that debt limit increases be matched dollar-for-dollar with spending cuts.
Obama said he wants future deficit-reduction deals to feature a “balanced” approach that includes spending cuts and further tax increases.