WASHINGTON — The Democratic leadership in the Senate asked President Obama on Friday to take “any lawful steps” available to avoid a default on the nation’s debt if Republicans continue to press their demand that an increase in the government’s borrowing limit be accompanied by spending cuts of the same magnitude.
“In the event that Republicans make good on their threat by failing to act, or by moving unilaterally to pass a debt-limit extension only as part of unbalanced or unreasonable legislation, we believe you must be willing to take any lawful steps to ensure that America does not break its promises and trigger a global economic crisis — without Congressional approval, if necessary,” wrote Senators Harry Reid of Nevada, Richard J. Durbin of Illinois, Charles E. Schumer of New York and Patty Murray of Washington.
The letter signaled an escalation in the war of words over the federal debt ceiling, which has already technically been breached, leaving the Treasury Department scrambling to meet the government’s domestic and foreign obligations. Lawmakers believe the bookkeeping flexibility will be exhausted by Feb. 15, at which time Washington would have to either default on its debt or shut down major expenditures.
Already, liberal policy experts have been trying to rally support for measures to go around the Republican blockade, from declaring that the Constitution’s 14th Amendment gives the president unilateral authority to raise the debt ceiling to calling for the minting of a trillion-dollar platinum coin that would be used to pay the nation’s debts.
“All Americans, Democrats and Republicans alike, have a stake in ensuring that our country meets its legal obligations,” the Democratic leaders wrote. “Financial markets have long viewed securities backed by the full faith and credit of the United States as the most trustworthy in the world. This lowers borrowing costs for homes, cars, and college for all Americans and strengthens our economy. If we violate that trust for the first time in history, we will never fully regain it, and every American will suffer.”
Mr. Obama has said he will not negotiate on raising the government’s statutory borrowing limit, but without some extralegal maneuver, it is not clear how he can keep that promise. The House speaker, John A. Boehner, Republican of Ohio, has not backed down on his demand that any increase in the debt limit include cuts at least equal in scope, and Senator Mitch McConnell of Kentucky, the Republican leader, has also said the debt ceiling issue must be used to secure spending reductions.
“Senate Democrats cannot ignore their responsibilities for political convenience — and the American people will not tolerate an increase in the debt limit without spending cuts and reforms,” said Michael Steel, a spokesman for Mr. Boehner.
Conservative Republicans say that even without an increase in the debt ceiling, the administration could continue to pay foreign and domestic creditors by ensuring that incoming tax receipts go first to paying off debts. To do that, however, huge and immediate cuts in government spending would be necessary, and global financial markets would almost certainly be rattled.
The Senate Democratic leaders did not suggest what “lawful steps” they had in mind. A Democratic aide said the senators would be inclined to have the president declare unilateral authority under the 14th Amendment, which says the debt’s validity “shall not be questioned.”
That, the aide said, would be more politically tenable than using the loophole of a trillion-dollar coin, issued under a legal provision that allows the Treasury to mint a platinum coin of any denomination. The coin would be deposited at the Federal Reserve, which in theory would then issue a line of credit against it.
But Democrats worry that the coin option would baffle voters. According to officials familiar with the drafting of the letter, top aides to Mr. Reid, the Senate majority leader, initially favored an explicit reference to the 14th Amendment. But in negotiations over the wording of their letter, the leaders opted for strategic ambiguity, to keep Republicans guessing and the president’s options open.
One of the main reasons for the letter was to bolster the president’s resolve, Senate aides said. In 2011, Mr. Obama dismissed the 14th Amendment option, telling reporters that his lawyers “are not persuaded that that is a winning argument.” This week when asked about the coin, the White House spokesman, Jay Carney, said, “There is no Plan B, there is no backup plan. There is Congress’s responsibility to pay the bills of the United States.”
Democratic leadership aides said the Senate would probably take up legislation in early February that would allow the president to raise the debt ceiling on his own in set increments, perhaps of $1 trillion. Congress would have the ability to reject the increase, but that would take a two-thirds majority.
That plan was first used at the suggestion of Senator McConnell in 2011 to solve the last debt-ceiling impasse. Late last year, Mr. McConnell proposed it on the Senate floor again, but when Democrats called his bluff, he reversed course and blocked his own proposal.
Democrats Urge Obama to Take ‘Any Lawful Steps’ to Avoid Default
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Democrats Urge Obama to Take ‘Any Lawful Steps’ to Avoid Default
