Shutdown averted, all eyes shift to 2012 budget and debt ceiling

With lawmakers and the administration coming together on Friday to avert a government shutdown, all eyes are turning to the debt ceiling and the 2012 budget as the next major political battles.

It was made clear on Sunday that the two issues will be linked going forward as all parties try to capitalize on momentum from this week’s deal to keep the government running over the next six months.

White House senior adviser David Plouffe, who cited the President Obama’s leadership efforts in budget negotiations, said the White House this week will unveil a long-term deficit-reduction plan ahead of an upcoming vote on raising the debt ceiling.

“All the leaders have said we have to raise the debt limit, so we’re going to,” said Plouffe, who managed President Obama’s 2008 campaign. “In that process, we should be able to reduce the deficit.”

With Congress facing a major vote on raising the debt ceiling, which will be needed by mid-May, Republicans say they have the leverage for enacting major spending cuts. 

House Budget Chairman Paul Ryan (R-Wis.), said he is happy that the White House wants to pair the debt ceiling vote with deficit-reduction efforts. However, he declined to say what cuts Republicans will want.

“I don’t want to get into our negotiations,” Ryan said on NBC’s “Meet the Press.”

But Majority Leader Eric Cantor (R-Va.) strongly hinted that Republicans may tie the debt-ceiling vote to enact major entitlement reforms outlined in the GOP’s budget, which is set to come to the House floor this week.

“Just as we saw happen in this week, there are leverage moments,” Cantor said on “Fox News Sunday.”

Plouffe, who appeared on four Sunday morning shows, urged Republicans to avoid major political fights that can hold up the debt ceiling vote.
“Mitch McConnell, Harry Reid, Eric Cantor, John Boehner – all the leaders have said we have to raise the debt limit,” Plouffe said. “But in that process we should be able to reduce the deficit. So we should not be playing brinksmanship with the full faith and credit of the United States of America.”

Both House Republican Conference Chairman Jeb Hensarling (Texas) and Senate Majority Whip Dick Durbin (D-Ill.) said on CNN's "State of the Union" that not raising the debt ceiling is not an option - although they disagree on how future budgets should address closing the budget gap.

"What I do think is, yes, it would be catastrophic to have the nation default upon its debt," Hensarling said.

"If we default on America's debt with this debt ceiling, it will have a dramatic negative impact on America's economy," Durbin said. "It will spin us into a second recession. We don't need that."

At the same time, Plouffe made clear the House GOP budget, unveiled by Ryan on Tuesday, is a nonstarter. Plouffe criticized the budget for cutting taxes on top earners while reducing the government’s Medicare and Medicaid contributions.

“The average senior down the road would pay $6,000 more for healthcare,” Plouffe said. “It cuts our energy investments at a time we're dealing with high gas prices, by 70 percent. So we're obviously not going to sign on with that approach.”

The Ryan budget transforms Medicare into a voucher-like system for those currently 55 and younger while converting Medicaid into block grant payments. The nonpartisan Congressional Budget Office offered up a problematic review this week, saying the House GOP budget would cost seniors to pay more for healthcare and reduce Medicaid services.

“What we’re trying to do here is trying to save Medicare and Medicaid so they’re sustainable,” Ryan said in defense of his budget Sunday, predicting the House will approve it this week.

Meanwhile, Plouffe said the president’s deficit-reduction plan will include reforms to entitlement programs, two months after the White House faced criticism for punting on the issue in its 2012 budget proposal. However, Plouffe also said the healthcare reform law enacted last year already provided a strong baseline for deficit-reduction efforts.

“We've had a lot of savings in healthcare – we have to do more,” Plouffe said. “So you're going to have to look at Medicare and Medicaid and see what kind of savings you can get. First squeezing them out of the system before you squeeze seniors.”

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