"Congressional leaders dug in their heels on
Tuesday against any quick deal to resolve a looming fiscal disaster
before the election, even as a major ratings agency warned that it
would downgrade the government’s debt if no solution was found by
year’s end. ... [Moody's] said Washington must come to agreement to
head off billions of dollars in simultaneous tax increases and
spending cuts scheduled to begin in January -- and to put the
government on a sustainable fiscal trajectory. Only then would the
United States keep its AAA rating." (09/11/12)
Democratic leaders have warned their
own members to tone down any discussion of a short-term
resolution to the “fiscal cliff,” betting that Republican fears
over the January deadline will drive them to the negotiating
table shortly after the November election.
Speaker John A. Boehner, reacting to
the downgrade notice from Moody’s Investor Service, said it
underscored the Republican position that the nation’s precarious
fiscal condition could be addressed only by cutting government
spending.
“The threat to American jobs comes not
from action on our debt, but from inaction on our debt,” he
said. “The president and his economic advisers have consistently
perpetuated the myth that downgrades are caused by efforts to
force the government to stop spending money we don’t have.”
The Moody’s warning comes a year after
its rival, Standard & Poor’s, downgraded the United States’
credit worthiness after the protracted stalemate over raising
the nation’s statutory borrowing limit.
Like S&P, Moody’s emphasized political
dysfunction more than soaring government debt. The agency said
Washington must come to agreement to head off billions of
dollars in simultaneous tax increases and spending cuts
scheduled to begin in January — and to put the government on a
sustainable fiscal trajectory. Only then would the United States
keep its AAA rating.
“If those negotiations lead to
specific policies that produce a stabilization and then downward
trend in the ratio of federal debt to G.D.P. over the medium
term, the rating will likely be affirmed and the outlook
returned to stable,” Moody’s said in a statement. “If those
negotiations fail to produce such policies, however, Moody’s
would expect to lower the rating.”
If no agreement is reached, all of the
Bush-era tax cuts will expire in January, just as more than
$1 trillion in automatic military and domestic cuts begin
slicing spending. Numerous economists have warned that the hit
to the economy will almost surely send the nation back into
recession.
At the Democratic National Convention
in Charlotte, N.C., Senator Richard J. Durbin of Illinois, the
Senate’s No. 2 Democrat, suggested that Congress move now on a
long-term framework that sets a target for deficit reduction and
establishes the proportion of spending cuts, entitlement changes
and revenue increases to get there. If an agreement on a broad
outline could be reached, Congress should then push back the
automatic tax hikes and spending cuts for six months, provided
that revenue increases and spending cuts be enacted to pay for
the delay.
The idea landed with a thud. “It isn’t
as if people are lining up to sign up for it,” Mr. Durbin said
Tuesday.
Republicans have been pummeling
Democrats on the presidential and Congressional campaign trails
about the fiscal cliff.
“We continue to want to provide
solutions and resolve the differences here in Washington,”
Representative Eric Cantor of Virginia, the House majority
leader, said Tuesday on CNBC. “All there’s been over the last
couple years is a one-way street.”
Mitt Romney and his running mate, Paul
D. Ryan, have suggested that the bipartisan deal last summer
that set up the automatic cuts was President Obama’s idea. Mr.
Boehner has accused the president of failing to lead on the
issue.
Democrats deny that, pointing to
statements from Mr. Boehner and Mr. Ryan praising the deal when
it was struck. Both men voted for it.
So far, Democrats do not appear
troubled by the attacks. As Republican warnings over military
cuts and tax increases grow louder, Democrats see their leverage
growing stronger.
“Republicans talk a big game on
defense — they just don’t want to pay for it,” said
Representative Chris Van Hollen of Maryland, the ranking
Democrat on the House Budget Committee. “They want to increase
defense spending, but they don’t want to ask people like Mitt
Romney to pay one more dime in taxes.”
If no deal is struck by Jan. 1, Mr.
Obama can present Congress a retroactive extension of only the
middle-class tax cuts, take it or leave it, Mr. Van Hollen said.
Representative Peter Welch, Democrat
of Vermont, said, “Revenues should be part of any plan, and
Democrats should not cave on that.”
With just 11 legislative days
remaining before the election, once-uncompromising Republicans
in Congress do appear to be reassessing their positions.
Earlier this year, House conservatives
demanded a cap on domestic spending for the coming fiscal year
that would be $19 billion below the level set by last summer’s
budget deal. Even Senate Republicans balked. On Thursday, the
House is expected to pass a measure keeping the government
functioning well into next year at the spending level House
Republicans found unacceptable in March, $1.047 trillion.
“My conservative friends in the Senate
have taken a position that says that a clean $1.047 number is
digestible, so for us to not take that position seriously would
be for us not to recognize the reality of Washington today,”
said Representative Tim Scott of South Carolina, who leads the
Tea Party-infused Republican freshmen.
But some Democrats are getting nervous
about the game of chicken in Washington. Senator Dianne
Feinstein, Democrat of California, said the $109 billion in
initial automatic spending cuts should be postponed for six
months, then cut at least in half.
“I’m of the opinion that cutting
haphazardly at a critical time in the economic progress of the
nation is absolutely the wrong thing to do,” she said Tuesday.
Jada F. Smith and Jennifer Steinhauer contributed
reporting.