Boehner says U.S. on path to default if Obama won't negotiate

The government shutdown

By Caren Bohan and Andy Sullivan

WASHINGTON | Sun Oct 6, 2013 6:16pm EDT

(Reuters) - Republican House Speaker John Boehner vowed on Sunday not to raise the U.S. debt ceiling without a "serious conversation" about what is driving the debt, while Democrats said it was irresponsible and reckless to raise the possibility of a U.S. default.

"The nation's credit is at risk because of the administration's refusal to sit down and have a conversation," Boehner told ABC's "This Week," adding that there were not enough votes in the House of Representatives to pass a "clean" debt limit bill, without any conditions attached.

Asked if that meant the United States was headed towards a default if President Barack Obama did not negotiate ahead of an October 17 deadline to raise the debt ceiling, Boehner said: "That's the path we're on."

The comments appeared to mark a hardening since late last week when Boehner was reported to have told Republicans privately that he would work to avoid default, even if it meant relying on the votes of Democrats, as he did in August 2011.

Republicans and Democrats also traded blame for a shutdown that has brought much of the government to a standstill for nearly a week. With no end in sight, the battle over funding the government has merged into the one over the debt ceiling.

Republicans have demanded that Democrats agree to delay implementation of the Affordable Care Act, the landmark 2010 law popularly known as Obamacare, as part of any spending bill.

They have also been seeking measures to address the federal government's long-term debt in exchange for raising its $16.7 trillion debt limit. If the borrowing cap is not increased, the United States could go into default, with what officials and economists say would be seriously damaging consequences for the U.S. and global economies.

"I don't want the United States to default on its debt," Boehner said. "But I'm not going to raise the debt limit without a serious conversation about dealing with problems that are driving the debt up. It would be irresponsible of me to do this."

Treasury Secretary Jack Lew warned of serious consequences if "the unthinkable" were to happen and the United States defaulted. "It is irresponsible and it is reckless to take that chance, which is why Congress needs to act," he told Fox News.

He told CNN: "On the 17th we run out of our ability to borrow, and Congress is playing with fire."

Senator Ted Cruz, who has been the standard-bearer for Republican opposition to funding the government without measures to undercut Obama's healthcare law, told CNN that Congress frequently in the past had attached curbs on spending to votes to raise the debt ceiling.

On this occasion, he said, Republicans were looking for three things before raising the debt ceiling: a significant structural plan to reduce government spending, no new taxes, and measures to "mitigate the harm from Obamacare."

Democrats vow not to negotiate on the funding bill or the debt ceiling, arguing that it is the job of Congress to pay its bills.

MARKETS WARY

Concerns that the shutdown could trim economic growth coupled with nervousness over a potential debt ceiling crisis later this month have weighed on stocks and pushed the U.S. dollar close to an eight-month low.

While selling has been orderly so far, investors expect volatility to rise as the shutdown continues and the debt ceiling deadline nears.

Democratic Senator Charles Schumer told ABC's "This Week" he did not believe Boehner would let the nation go into default, as it would lead to chaos on financial markets, freeze lines of credit and cause a jump in interest rates.

"I believe Speaker Boehner will not do that when push comes to shove," Schumer said, adding that Boehner and Republicans would be forced "sooner or later" to stand up to the "hard right" in their party and give in. "They will have to back off."

Obama and the Democrats say bills to fund the government and raise the debt ceiling could be resolved quickly if Boehner permitted votes on simple, no-strings-attached measures in the Republican-controlled House.

Asked about reports that around 20 House Republicans have said they would join some 200 Democrats in voting for such a bill - enough to pass it - Boehner told ABC that there were not enough votes in the chamber to pass such a bill.

White House spokesman Jay Carney said Boehner should prove he does not have the votes for a clean bill, known as a "continuing resolution," or CR, by putting a bill on the House floor. "The Speaker says there are 'not enough votes' to pass a clean CR? If he's right, why not prove it?" Carney said via Twitter.

The Affordable Care Act aims to provide health insurance to millions of Americans without coverage. Republicans argue it is a massive government intrusion into private medicine that will cause insurance premiums to skyrocket, put people out of work and eventually lead to socialized medicine.

The government shutdown started on Tuesday and initially idled as many as 800,000 federal workers, shuttering all but essential government operations.

The Pentagon said on Saturday it would recall the vast majority of some 350,000 civilian Defense Department employees sent home during the shutdown. The announcement came as Democrats and Republicans in the House agreed to pay all furloughed employees retroactively once the government reopened.

NO MAGIC SOLUTION

In an interview on CNN, Lew repeatedly declined to say what would happen if Congress failed to raise the debt ceiling.

Some Republicans have argued that the U.S. government would be able to continue to service its debt even if it did not have enough money to pay all of its bills. Lew declined to say whether that would be the case, but he argued that it would be just as bad if it missed other obligations like Social Security pension payments or Medicare payments to hospitals and doctors.

"There is no option that prevents us from being in default if we don't pay our bills," Lew told CNN's "State of the Union."

Lew said the Obama administration has determined that legally it does not have the authority to raise the debt ceiling on its own, as some Democratic lawmakers have suggested.

"There's a desire here for there to be some kind of a magic solution. There's an easy solution: a majority in Congress would do the right thing if given a chance to open the government. A majority in Congress would do the right thing if given a chance to let us pay our bills."

While most House Republicans have remained firmly opposed to reopening the government without some changes to Obamacare, Republicans in Democratic-leaning states have been trying to build support for a revolt against that stance.

In an opinion piece on Sunday on local news website Philly.com, seven Republican House members from districts in northeastern states called for a measure to reopen the government without conditions.

"The fight to stop Obamacare cannot continue with the government shut down. That's why we support a short-term, clean funding bill to turn those lights back on," wrote the group, which included Representatives Charlie Dent of Pennsylvania and Frank LoBiondo of New Jersey.

The lawmakers also said they were talking with some Democrats on a possible compromise plan that would involve reopening the government for six months while repealing the medical device tax, a provision of Obamacare that is unpopular with Republicans and some Democrats.

(Reporting by Tabassum Zakaria, Bill Trott, Paul Simao, Jeff Mason, Tom Ferraro, Richard Cowan, Phil Stewart; Writing by Claudia Parsons; Editing by Paul Simao)