US debt limit bill gives political cover to both parties

"Our base case remains a series of endless cliffs," Chris Krueger of the financial services firm Guggenheim Partners wrote in a note. "Short-term extensions of these cliffs could result in an endless game of kick the can - until the can kicks back."

As for deficit reduction, he wrote: "Don't hold your breath, though hope springs eternal."

Ethan Harris of Bank of America Merrill Lynch said, "It is another example of where politicians' bark seems worse than their bite."

Welcome to the latest chapter in a two-year battle between Obama and congressional Republicans over how the world's largest economy can gain control of a $16.4 trillion national debt.

There was the 2010 presidential commission to find budget solutions, a 2011 congressional "super committee" that was supposed to put the government on a sound fiscal path and a "fiscal cliff" of late 2012 designed to force big decisions.

All sputtered.

Now, Republicans have crafted a debt limit increase without setting a specific new ceiling on borrowing that they could be blamed for.

In a tough-looking move, their legislation aims to withhold lawmakers' pay if the Senate or House fail to produce a non-binding budget plan this year. Some lawmakers argue that the pay provision violates the Constitution, which restricts Congress' ability to "vary" its own compensation.

Wednesday's bill does not require the Senate and House to agree on a budget, only to pass their own budget bills. If the Republican-controlled House and Democratic-controlled Senate manage to pass proposals, they are likely to be vastly different.

Last year, Democrats in the Senate rejected a House Republican budget that projected a plan to bring the budget into balance gradually over a 30-year period.

In pledging to eliminate budget deficits within 10 years, House Republicans are putting themselves on a path to writing a budget that will cut even more deeply into Medicare and Medicaid healthcare for the elderly, disabled and poor, and the Social Security retirement program.

... contd.

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