* House Republicans undecided on strategy
* CBO releases forecast of falling deficit
* Democrats insist on "clean" debt limit hike
* Treasury bill auction shows jitters over debt ceiling
By Richard Cowan and David Lawder
WASHINGTON, Feb 4 Republicans said on Tuesday
they hoped to attach deficit-reduction measures to legislation
raising the U.S. debt limit, but a new government report that
forecast a more favorable budget outlook had the potential to
undercut their efforts.
The call by House of Representatives Speaker John Boehner
for deficit-reduction steps was an attempt to answer the
concerns of the smaller-government Tea Party activists who
populate his rank-and-file.
But a series of obstacles could thwart Boehner's plans.
Democrats are promising to close ranks behind President Barack
Obama, who has insisted on a "clean" debt limit hike that allows
the federal government to continue paying its obligations.
And Boehner's own Republicans are divided over which
deficit-reduction measure or measures to link to the debt hike
As House Republicans met behind closed doors to hash out a
strategy, financial markets showed some early signs of jitters
over the debt ceiling, as investors pushed the interest rate on
an $8 billion one-month Treasury bill auction to the highest
level since the government shutdown in October.
The Treasury also began to employ extraordinary cash
management measures to ensure that it can pay its bills after a
temporary extension of borrowing authority expires on Saturday.
Treasury Secretary Jack Lew has warned Congress that it must
act by the end of February to raise his borrowing authority or
risk a historic debt default.
"Nobody wants to default on our debt," Boehner told
reporters following his meeting with rank-and-file Republicans.
Boehner added that while Republicans advance legislation to
raise the U.S. borrowing authority, "We ought to do something
about jobs and the economy, about the drivers of our debt."
His comments came as the non-partisan Congressional Budget
Office released forecasts estimating this year's budget deficit
would fall to $514 billion. While sizeable, that would be down
from the wrenching deficits of $1.413 trillion in fiscal 2009
and $1.3 trillion in both 2010 and 2011, which fueled heated
CBO also said that the budget deficit would fall further in
fiscal 2015, to $478 billion.
Congressional aides from both parties have acknowledged that
the trajectory of budget deficits could take the edge off Tea
Party demands for a new round of spending cuts.
Republicans had hoped an end-of-February deadline for
raising the debt ceiling or risking default would give them an
opportunity to slip in some new government savings.
If there is one thing Congress does well it is react to an
imminent crisis. On a superficial level, the CBO numbers offered
the opposite: dwindling budget deficits as the economy recovers.
That likely means that for the next year or two, large-scale
deficit reduction could be off the table, especially with
Republicans more focused on repealing Obamacare than tackling
tax and entitlement reforms that could fix budget headaches.
MORE THAN ONE ROADBLOCK
Besides Tuesday's CBO report, two other roadblocks stood in
the way of Republican attempts to attach deficit-reduction
measures to a debt limit increase.
The biggest obstacle is Democrats, who vow to enforce
Obama's demand that there be no negotiations on a debt limit
bill and that a simple, "clean" extension be enacted.
Senator Patty Murray, a Democrat who heads the Senate Budget
Committee, urged that a no-strings-attached debt limit bill move
through Congress promptly. "The longer Republicans take to dream
up empty debt limit demands, the more economic uncertainty and
harm they'll cause for workers, families and businesses," Murray
said at a committee hearing.
Democrats aren't the only hurdle to using the debt limit to
leverage greater deficit reduction.
Republicans themselves have not yet been able to decide what
to attach, either in spending cuts or in job creation, to a debt
Several ideas have been floated, ranging from demanding
Obama administration approval of the construction of the
Keystone XL oil pipeline from Canada to altering the "risk
corridor" provisions of Obama's health insurance law, which
protect insurers from certain losses.
"When we have a decision, we'll let you know," Boehner said.
Senate Democratic leader Harry Reid quipped, "The last thing
we need is another manufactured crisis driven by the Tea
House Budget Committee Chairman Paul Ryan, noting the rough
waters CBO sees long term if Congress ignores the high cost of
retirement and healthcare for an aging population, said,
"Washington can't continue to ignore the problem: trillions of
dollars in empty promises" that will saddle Washington in coming