Last updated: September 18, 2013 6:19 pm

Top Republicans harden line in budget showdown

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Republican congressional leaders, under pressure from the Tea Party, have hardened their line against the White House in a coming budget showdown, increasing the chances of a crisis over US government funding in coming weeks.

Barack Obama on Wednesday urged big business to put pressure on Republicans in Congress to step back from a fight over the budget which threatens a government shutdown and a possible default over US borrowings.

But as the president addressed the Business Roundtable, which represents the chief executives of large US companies, John Boehner, the Republican House Speaker, announced his party’s tougher new position on government spending.

Mr Boehner said approval of a new budget by October was tied to White House agreement to cut funding for its signature healthcare reform, a position which he had resisted until a conservative rebellion in his caucus forced a change.

Even if Republicans and Democrats do reach a short-term deal on the budget, Mr Boehner said Republicans would vote to lift the US debt ceiling to allow more borrowings only if the administration delayed “Obamacare” by a year.

The debt ceiling is expected to be reached around mid-October. The implementation of Obamacare starts in earnest a couple of weeks before, with the launch of state health exchanges.

The White House reiterated this week it would not negotiate over the debt ceiling and has long said the health reforms, passed in 2010 and upheld by the Supreme Court in 2012, are not on the table.

The administration’s budget office on Wednesday sent a notice to government departments to tell them to prepare for a possible government shutdown on October 1, saying “prudent management requires agencies” to be ready.

The House is due to vote on its budget proposal on Friday, and then send it to the Senate, where the chamber’s Democratic majority has vowed to reject its Obamacare provisions.

“Democrats are not going to agree to defund or delay healthcare reform. It’s just not going to happen,” said Patti Murray, part of the Democratic leadership team in the chamber.

A stand-off over congressional approval for new borrowings in August 2011 prompted the first ever US credit downgrade and hurt consumer confidence at a time when the economy was struggling to pull out of the financial crisis.

In his speech to business leaders, Mr Obama said “you have never seen in the history of the US the threat of not raising the debt ceiling being used to extort a president” by forcing “issues that have nothing to do with the budget and the debt.

“Just flip the script for a second and imagine a situation in which a Democratic speaker said to a Republican president, I’m not going to increase the debt ceiling unless you increase corporate taxes by 20 per cent.”

Mr Boehner said that, contrary to Mr Obama’s claims, “for decades, congresses and presidents have used the debt limit for legislation to cut spending. This year is not going to be any different.”

Just flip the script for a second and imagine a situation in which a Democratic speaker said to a Republican president, I’m not going to increase the debt ceiling unless you increase corporate taxes by 20 per cent

- Barack Obama

Calling Obamacare a “train wreck”, Mr Boehner said the president “has signed seven bills over the last two and a half years to make changes and I sincerely hope our friends in the Senate have plans to make this an eighth time”.

Chris Krueger of Guggenheim Securities, a financial services and advisory firm, said his group was raising “our odds of a government shutdown in 14 days to 40 per cent from a one to three probability”.

“We are basing the 60 per cent odds that there will not be a government shutdown on blind faith because there is little to no evidence to suggest that the House, Senate, and White House can agree to a stopgap measure in time.”

The two issues – the budget and the debt ceiling – may be dealt with together, or Congress may agree to pass a temporary budget extension, setting the stage for the Obamacare fight over approval for new borrowings.

The House Republicans have already voted about 40 times to repeal or emasculate Obamacare since early 2011, to no end.

Republicans, and conservative activist groups, are split over the tactics the Tea Party in the House have forced on Mr Boehner, with many saying they will not work.

Some of the most conservative Republican senators, including Jeff Flake (Arizona), Tom Coburn (Oklahoma) and Pat Toomey (Pennsylvania), have opposed the “defund Obamacare” push, because they say it raises unrealistic expectations it can be achieved.

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