The seemingly unbridgeable impasse between the two parties as the deadline for raising the nation’s debt limit approaches has Tom Daschle losing sleep, as he never did when he was a Senate Democratic leader in the mid-1990s and Congressional Republicans forced government shutdowns rather than compromise on spending cuts.
“That was nothing compared to this. That was a shutdown of the government; this could be, really, a shutdown of the entire economy,” Mr. Daschle said. “You can’t be too hyperbolic about the ramifications of all this.”
Democrats and Republicans with legislative experience agree that even if both sides decided Saturday to raise the $14.3 trillion borrowing ceiling and to reduce future annual deficits, it would be extremely difficult for the compromise measure to wend its way through Congress before Tuesday’s deadline, given Congressional legislative procedures.
But such a bipartisan deal seemed virtually impossible on Friday, as House Republicans approved their bill and dug in deeper against compromise with President Obama.
Any possibility of avoiding an economy-shaking default seemed to rest on hopes of a so-far nonexistent compromise in the Senate — between the majority leader, Harry Reid, Democrat of Nevada, and the Republican minority leader, Senator Mitch McConnell of Kentucky — that could pass by Tuesday and then be sent to the House.
That would force Speaker John A. Boehner to decide at the 11th hour whether to hold a House vote on a bill that would not get many Republican votes, forcing him to rely on Democrats and perhaps further weaken his leadership, or to risk blame for an economic crisis.
“He’s going to have to pass it with Democratic votes. That’s going to be a tough decision, but he doesn’t have any choice at that point, particularly if the markets are reacting,” said Tom Davis, a former House Republican leader from Virginia. “That’s the position they’ve got themselves in.”
But, he added: “The stakes are much higher here. If interest rates start spiking up, it’s going to cost us a lot more than anything you could save. They’re playing brinkmanship with our credit rating. That’s not very smart.”
Mr. Davis recalled his vote in late September 2008 for the $700 billion Troubled Asset Relief Program that President George W. Bush sought to rescue a financial system near collapse. “I hated TARP, but no one had a better alternative,” he said.
But most of his Republican colleagues opposed the rescue measure and helped defeat it, sending the stock markets tumbling even as the vote was taking place. That reaction forced the Republicans to retreat, and days later a bailout bill carried on a second try.
Mr. Davis predicted that the current standoff over the debt limit could end similarly. “When the markets react” — as early as Monday if there is no compromise in sight — “I think the politicians will act,” he said.
Yet many of the Congressional Republicans who won office last November with the help of the antigovernment Tea Party movement, giving their party control of the House, campaigned on promises to resist any government bailouts and to oppose an increase in the debt limit. Some lawmakers have been quoted describing the debt-limit vote as a way to make up for Republicans’ support of the bank rescue three years ago.
Against that backdrop, major business groups issued statements on Friday reiterating their calls for a deal, but with a heightened note of alarm.
The Business Roundtable, an association of executives of some of the country’s largest corporations, sent a letter to the White House and Congress warning that “inaction poses an unacceptable financial risk to the nation’s economic growth and job creation” — this on a day when the latest economic data confirmed that growth slowed in the second quarter with the fallout of Japan’s tsunami, Europe’s debt crisis and upheaval in the Middle East.
“Failure to Raise Debt Ceiling Could Turn the Economy Back Into a Recession” was the headline on a statement from the U.S. Chamber of Commerce.
“I’ve never seen people genuinely worried like this,” said Vin Weber, a former representative from Minnesota, now a Republican strategist who has been meeting with other Republicans, including lawmakers, this week. “This time you have people who genuinely don’t know what the outcome is going to be, and they’re worried that the wrong outcome could genuinely be disastrous.”
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