WASHINGTON (Reuters) - The White House on Monday urged Republicans not to tie an increase in the U.S. debt ceiling to spending cuts and admitted that President Barack Obama’s own vote against an increase in 2006 was a “mistake”.
“He realizes now that raising the debt ceiling is so important to the health of this economy and the global economy that it is not a vote that, even when you are protesting an administration’s policies, you can play around with,” White House press secretary Jay Carney told reporters.
Obama was a senator from Illinois when he voted against raising the U.S. debt ceiling while George W. Bush was president.
Now his own government could hit the current $14.3 trillion limit on its borrowing authority by mid-May and it will need Congress to approve another increase in that debt ceiling.
Republican support is far from guaranteed, and investors are worried that talks could get bogged down.
Republicans forced Obama’s Democrats to accept $38 billion in spending cuts in a budget deal to avert a government shutdown on Friday, and they say they will want significant new concessions in return for voting to lift the debt ceiling.
Obama will offer a long-term plan for deficit reduction in a speech in Washington on Wednesday afternoon, laying out a timetable for a battle likely to dominate the 2012 election.
The White House is anxious to separate the debate over the debt limit from the spending fight, but it has so far stopped short of saying Obama would veto a debt limit bill that arrived on his desk with spending cut-strings attached.
“We should move quickly to raise the debt limit and we support a clean piece of legislation to do that,” Carney said.
House of Representatives Speaker John Boehner, the Republican who led the push for spending reductions in last week’s negotiations, made clear he will insist on further cuts as part of the discussions on the debt ceiling.
“My members won’t vote to increase the debt limit unless we are taking serious steps in the right direction,” he told Fox News on Monday.
Failing to lift the debt ceiling risks the United States defaulting on its debt. Carney said it could have an “Armageddon-like” impact on U.S. interest rates and growth.
“It would be catastrophic folly not to raise the debt ceiling at a time when growth and job creation are moving forward and helping us pull ourselves out of this recession ... creating an economic environment that will allow us to address our deficit and debt issues,” he said.
Investors are getting increasingly worried. PIMCO, the world’s largest bond fund, has adopted a short position in U.S. government-related debt, a sign of the asset manager’s serious concerns about the U.S. fiscal outlook.
Republicans control the House and Democrats hold the Senate but both chambers of Congress must pass the debt ceiling legislation, and then resolve their differences, before sending it to the White House to be signed into law.
Republicans turned public anger over record U.S. budget deficits into a winning campaign in the 2010 congressional elections and will take the same message into next year’s presidential and congressional race.
They also accuse Obama of failing to show leadership in reducing the deficit.
Carney said the White House’s deficit reduction proposals could be turned into legislation ahead of next year’s presidential campaign, when Obama will seek re-election.
“He very much believes that this can produce real legislation, tangible results ... before the 2012 election, absolutely” Carney said.
Obama’s deficit speech on Wednesday follows a deal on spending cuts for the rest of this fiscal year struck with barely an hour to spare before last Friday’s midnight deadline. It stopped a government shutdown that the White House feared would hinder the economic recovery and idle more than 800,000 federal workers.
The Senate and House are expected to approve that agreement this week, although lawmakers on both sides of the political aisle have criticized it.
Fiscal conservatives aligned with the Tea Party movement pressured Boehner for even deeper cuts, while liberal Democrats fear the reductions will hurt social programs for Americans dealing with the lingering effects of a recession.
Additional reporting by Susan Cornwell, Caren Bohan, John Whitesides and Dave Clarke; Editing by Kieran Murray