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January 11, 2013 10:12 pm
Democratic leaders in the Senate gave President Barack Obama the green light to sidestep Congress and take executive action to avoid a default if no agreement is reached to raise America’s borrowing limit.
“We believe you must be willing to take any lawful steps to ensure that America does not break its promises and trigger a global economic crisis – without congressional approval, if necessary,” said Harry Reid, Dick Durbin, Chuck Schumer and Patty Murray, the party’s top brass in the upper chamber, in a letter to the president on Friday.
The move could raise pressure on the White House to consider creative action in the event that lawmakers fail to forge a compromise on lifting the country’s debt ceiling of $16.4tn by the end of next month. Among the solutions that have been floated are a presidential invocation of the 14th amendment of the constitution – which says the debt of the US “shall not be questioned” – in order to continue borrowing.
The White House could also simply decide tax and spending laws take precedence over the debt ceiling constraints if they are in conflict, and keep spending money.
Or the administration could consider a more outlandish plan to mint one or more platinum coins, to be deposited at the Federal Reserve, and allowing the government to continue paying its bills even without fresh congressional authority to borrow more money. Thanks to an arcane loophole, the US Treasury can mint commemorative coins worth any denomination.
So far, the Obama administration has said there is no “back-up plan” when it comes to raising the US debt limit, demanding that Congress do its duty and increase the borrowing authority with no strings attached.
However, Republicans say deep spending cuts must be part of any deal to raise the debt ceiling, and scoffed at the proposal by Senate Democrats for the White House to ignore Congress on this matter if necessary.
“Senate Democrats cannot ignore their responsibilities for political convenience – and the American people will not tolerate an increase in the debt limit without spending cuts and reforms,” said a spokesman for John Boehner, the Republican speaker of the House of Representatives.
The tension surrounding the debt limit marks the latest flare-up in America’s seemingly unending budgetary battles. On January 1, after several rounds of negotiations, Congress struck a last-minute agreement to avoid much of the fiscal cliff – a mix of spending cuts and tax hikes due to hit the economy starting this month. But many of the big fiscal policy questions were pushed to this year, with deadlines approaching soon.
This week, Mr Obama appointed Jack Lew, his chief of staff and former budget director, to be Treasury secretary, in a sign of the high priority the president is giving to the looming fiscal battles. If confirmed, Mr Lew will replace Tim Geithner, who is due to leave later this month.
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