Budget drama unfolds again, with Obamacare center stage

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ObamaWASHINGTON — A political drama unfolds in the nation's capital this week as Republicans attempt to dismantle President Obama's health care law, using two budget deadlines that threaten a government shutdown and a national default as their leverage.
Congressional Republicans say the two deadlines provide the best opportunity to extract concessions on the implementation of the Affordable Care Act. Open enrollment begins Oct. 1 — the same day the federal government would shut down if Congress can't agree to a stopgap spending measure. The second deadline arrives in mid-October when the government hits its borrowing limit.
House Republicans are executing a two-pronged attack to gut the health care bill: They approved a spending bill that would defund the law Friday, and they will move forward this week with separate legislation that would delay the implementation of the law for one year in exchange for a one-year extension of the debt limit.
Democrats say they will not bow to either demand, setting the two parties on a familiar collision course that holds sweeping political and economic consequences ranging from locked doors at museums to a default on billions of dollars of national debt payments.
The leading actors are well known in this drama, and they are reading from familiar scripts.
House Speaker John Boehner, R-Ohio, at a GOP rally after Friday's vote: "Our message to the United States Senate is real simple: The American people don't want the government shut down, and they don't want Obamacare."
Senate Majority Leader Harry Reid, D-Nev., in a statement Friday: "So in case there's any shred of doubt in the minds of our House counterparts, I want to be absolutely crystal clear: Any bill that defunds Obamacare is dead, dead."
Sen. Ted Cruz, R-Texas, speaking on Fox News Sunday: "I think Senate Republicans are going to stand side by side with Speaker Boehner and House Republicans, listening to the people and stopping this train wreck that is Obamacare."
President Obama, speaking to a Congressional Black Caucus event Saturday night: "Let me say as clearly as I can: It is not going to happen. … We're not going to allow anyone to inflict economic pain on millions of our own people just to make an ideological point."
What is uncertain is how the story ends.
Here is a guide to the coming acts:
BACKSTORY: Another 'fiscal cliff'
There has been nearly unanimous opposition among Republicans to the Affordable Care Act since it became law in 2010. The GOP-controlled House has voted more than 42 times to repeal the law, but those acts were symbolic acts of defiance against a Democratic Senate and White House.
"When it comes to the health care law, the debate in the House has been settled. I think our position is very clear: The law is a train wreck, and it's going to raise costs. It's destroying American jobs, and it must go," Boehner said last week.
The impending budget deadlines give the party its latest opportunity to take on the law because the president needs Congress to pass legislation to prevent a fiscal crisis.
The fiscal year ends Sept. 30, and without a stopgap measure, a shutdown begins the next day.
The second deadline comes in mid-to-late October, when the nation hits its $16.7 trillion debt limit. A vote of congressional approval is required to raise the limit and allows the U.S. government to meet its financial obligations.
It's a politically unpopular vote because it can appear to be authorizing new government spending, but in fact, it just covers what Congress has already approved to spend on things such as Social Security benefit checks and interest payments on old debt.
This fall is the third time Congress has had to approve a debt ceiling increase under Obama. Though the president has vowed not to negotiate over terms to raise the debt ceiling, he has negotiated in the past — fueling GOP confidence he will do so again.
In 2011, Obama and Congress agreed to raise the debt ceiling in exchange for $2.1 trillion in spending cuts. Previous debt ceiling increases have been tied to spending cuts and budget changes. "Every major deficit reduction plan over the last 30 years has been tied to the debt limit," Boehner said.
For Republicans, whether the negotiations are a success or a failure hinge on how far they go to rein in Obamacare.
"I believe that this is our time. This is when it matters. Yes, we voted to repeal Obamacare 30 to 40 times, but this is when it really counts," said Rep. Marlin Stutzman, R-Ind.
ACT ONE: The shutdown threat
On Friday, House Republicans approved, 230-189, a stopgap measure that would maintain funding levels for federal agencies through Dec. 15. It also includes legislation that would defund the health care law and prioritize debt payments in the event of a default on the debt ceiling.
Senate Democrats intend to respond this week by stripping out the defunding language and default provisions and volleying back to the House a bill that only would extend spending.
If Senate Republicans such as Cruz and Mike Lee of Utah make good on their threat to use every tactic available to stop Obamacare, the Senate may not vote on a stopgap spending bill until this coming weekend, leaving the House little more than 48 hours to accept or reject it.
Democrats are betting Republicans won't have the political will to go past the Sept. 30 deadline, because shutdowns are unpopular with the public and the shutdown fights of the 1990s during the Clinton administration left the GOP politically bruised.
Boehner has consistently stated he does not want a shutdown, but there is distinct pressure among his rank-and-file to hold the line.
"I take (Boehner) at face value that this is a fight that he's going to fight. He believes that by year's end, we will have defunded or postponed Obamacare for a year, and I think he means it," said Rep. Matt Salmon, R-Ariz.
A government shutdown would not be a first. There were 17 full or partial shutdowns from 1977 to 1996, lasting a total of 109 days, according to the Congressional Research Service.
Every shutdown is different, and this year's budget battle would come against a different backdrop. Federal budgets have already been reduced by across-the-board cost-cutting imposed in the 2011 compromise, resulting in furloughs at many federal agencies.
Some services would not be affected. Social Security checks would probably still go out, but the federal employees necessary to process new claims could be sent home. Postal delivery would continue. Museums and national parks would close, but government functions necessary for health and safety, including most law enforcement and military operations, would be exempt.
ACT TWO: The default threat
However the stopgap spending bill is resolved, soon after it lurks a fiscal fight that holds greater consequences to the U.S. and global economies.
"Shutting down the government is one bad thing, but you shut it down, you open it up again," said Minority Leader Nancy Pelosi, D-Calif., "Not lifting the debt limit is unleashing a torrent, a river of no return. It is beyond cataclysmic."
The nation has never defaulted. Though the exact impacts are unclear, there is broad consensus among economists, financial markets and most lawmakers that it would upend the markets.
"If you don't raise the debt limit in time, you will be opening an economic Pandora's Box. It will be devastating to the economy," Moody's economist Mark Zandi testified before a congressional panel last week.
He explained the consequences: "Consumer confidence will sharply decline, investor confidence, business confidence. Businesses will stop hiring, consumers will stop spending, the stock market will fall significantly in value, borrowing costs for businesses and households will rise."
House Republicans are assembling a debt limit package for a vote as early as this week that would increase the debt limit through 2014 but with conditions: a one-year delay of the implementation of the health care law and a grab bag of GOP-backed economic growth proposals, health care entitlement spending changes, construction of the Keystone XL oil pipeline and instructions for an overhaul of the U.S. federal tax code.
Democrats and the White House have not blinked. "We are going to stand together to protect the president's health care law, and we're going to stand together and not negotiate one iota when it comes to the debt ceiling," said Sen. Charles Schumer, D-N.Y.
During a 2011 impasse over the debt limit, the Treasury Department ruled out many stopgap measures to maintain spending and pay its debts, such as selling off assets. The United States has more than $350 billion in gold reserves on its balance sheet, but Treasury officials said a "fire sale" on gold would hurt the dollar and the economy. The Treasury has no practical way of reducing payments by an across-the-board percentage to stay under the debt limit.
Congress has debated several proposals to prioritize payments — by making sure bond holders, Social Security recipients or active-duty military would get paid first, for example. But without direct congressional authority, the Treasury has no way to prioritize who gets paid and who doesn't.
"At that point, meeting our nation's financial obligations — including Social Security and Medicare benefits, payments to our military and veterans and contracts with private suppliers — will be put at risk," Treasury Secretary Jacob Lew said last week.
SUBPLOT: GOP divisions
The legislative assault on the health care law has exposed divides in the GOP, not on the merit — because there is strong support for delaying or dismantling the law — but on the tactics and the political risks they hold.
At least a dozen Republican senators have publicly split with colleagues on the effort to tie defunding the law on the stopgap spending measure — a clear indication that the defunding effort can't pass Congress.
"I've said from the beginning that this is a tactic that won't work," said Sen. Bob Corker, R-Tenn. "When you have one-third of government, you don't run the government."
The national campaign led by Cruz, Lee and other fiscal hawks and outside groups has raised unrealistic expectations for what Republicans can achieve controlling just the House, Corker said.
Sen. Tom Coburn, R-Okla., made the same point on Face the Nation Sunday. "I agree with them that if we could do this, we should do it. But we can't. And the political reality, you know, tactics and strategies ought to be based on what the real world is. And we do not have the political power to do this."
Other Republicans, including Sen. Lamar Alexander, R-Tenn., say the party is better served by campaigning against the law and working to pick up the necessary six Senate seats Republicans need to take over the Senate in 2014 and try to win the White House in 2016.
Republicans see Democratic vulnerabilities in the fight: A number of Senate Democrats are vying for re-election in conservative states.
House Majority Leader Eric Cantor, R-Va., called out four Senate Democrats by name Friday, Sens. Mark Pryor of Arkansas, Kay Hagan of North Carolina, Mark Begich of Alaska and Mary Landrieu of Louisiana, as politically vulnerable because of the law.
"We have some leverage there," said Rep. Tom Cole, R-Okla. "We have a lot of Democrats who don't want to have to vote on this and that frankly might want to work with us in some way to not have to face that choice."
Cole says he is mindful that a shutdown or a default could be perilous for his party, citing the lessons of the 1990s shutdown. "I don't need to relive the play, since every survivor just about tells you: 'Don't do it again.'"
EPILOGUE: Sequels are guaranteed
The ending will almost certainly be inconclusive.
Three years of a divided Congress in the Obama administration has not produced the kind of long-term budget agreements that both sides claim to seek. Instead, it is an era of short-term solutions.
The spending bill the House has approved would only carry through mid-December, reopening the possibility of a shutdown at the height of the holiday season. The debt limit increase offered by House Republicans would carry the nation only through the end of 2014.
"Anybody who thinks a 'Grand Bargain' is in the works, it is pure fantasy," said federal budget expert Stan Collender.
Contributing: Gregory Korte
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