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April 29, 2011 / J. Shaw

Harry Reid has a Revolt on his hands on Debt Ceiling.

“As catastrophic as it would be to fail to raise our debt ceiling, it’s even more irresponsible to not take this opportunity to own up to our unsustainable spending path.”

— Statement from Sen. Mark Udall, D-Colo., announcing his refusal to grant an administration-requested increase in the nation’s $14.3 trillion borrowing limit without spending curbs.

Senate Democrats are increasingly vocal about their opposition to the increase in federal borrowing power sought by President Obama unless it is attached to sharp limits on spending.

The administration is talking about spending curbs, but is afraid of making the vote conditional because of fiscal uncertainty and the chance of a partial government shutdown.

The government only has about $50 billion in borrowing power left. The Treasury Department has started rearranging its cash reserves to slow the rate of borrowing from its usual $4 billion a day. In the previous week, the government only borrowed about $20 billion as Secretary Tim Geithner deploys cash hoarded for just such an occasion.

Geithner can keep that up until July, but soon thereafter it means shutting down parts of the government in order to meet interest payments on existing debt. The president doesn’t want any kind of a shutdown and is therefore not eager to see a lengthy negotiation over debt cap.

Plus, with the economy faltering and inflation on the rise, the president believes the government’s lenders will charge higher interest rates (which could further hamper growth and potentially weaken the dollar even more) if there is a debt stalemate. Fiscal hawks argue that the interest rate crunch is more likely if the government ignores the current fiscal crisis and increases borrowing unconditionally.

Senate Majority leader Harry Reid, though, has something of a revolt on his hands when it comes to the debt ceiling. Sens. Joe Manchin of West Virginia, Mark Udall of Colorado, Kent Conrad of North Dakota, Mark Pryor of Arkansas and others have been taking increasingly sharp stands in favor of steep conditions on the debt hike.

What the White House is looking to avoid is a big battle now. The president’s men need to save their bargaining chips for the major budget battle that is looming at the end of the fiscal year. They are not looking for members of their own party to trade things away on a debt vote. Remember, the administration’s original position was that the debt hike should be immediate and unconditional.

House Republicans have let the Democratically controlled Senate know that their team will have to serve something up. The GOP is generally opposed to any increase, and seems unfazed by the prospect of a partial summertime shutdown.

But with Reid’s 53-member caucus at loose ends over how to structure the debate and the Gang of Six negotiations for a grand, bipartisan compromise on debt and deficits seemingly stalled, the majority leader will have a very difficult time accommodating the president’s demands.

The administration is sending Vice President Joe Biden to help Reid put together some sort of deal, but the demands being made by members of the Democratic caucus would cause serious headaches for the administration, especially knowing that Republicans will again be squeezing the president on spending when the fiscal year ends in September.

Reid needs all 53 of his members and seven Republicans to pass something, and it looks increasingly likely that the concessions will have to be pretty deep to get there. In the fight over spending for the current fiscal year it was John Boehner who was on the spot, but since this is a Democratic request and because political pressures and ideological splits are rending his caucus, the pressure is on Reid this time.

Adding to Reid’s woes is the fact that his opponent in this budgetary battle, Majority Leader Mitch McConnell excels at procedural guerrilla war and will make even a cagy tactician like Reid pay dearly for every vote. Obama did more for Reid in 2010 than any other candidate in his party. Now it’s time for Reid to earn his keep.


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