Playing Chicken with the Debt Limit

A more important — and far trickier — confrontation than heath care reform is brewing between the House GOP and the Obama White House: in late March, the U.S. government will hit its legal debt limit

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From Left: Pawlenty: Bill Clark/Roll Call/Getty Images; Gingrich: Ida Mae Astute/ABC/Getty Images

For House Republicans, voting to repeal health care reform was easy. But a more important — and far trickier — confrontation is brewing between the House GOP and the Obama White House. Although the stakes are huge, neither side is quite sure how to play its cards.

In late March, the U.S. government will hit its legal debt limit, which takes an act of Congress to increase. Obama officials (and many economists) insist we have to extend our national credit line to fund a deficit-running government, lest the global financial markets panic about a U.S. debt default — a "catastrophic" outcome, as Treasury Secretary Timothy Geithner warned. But many conservative Republicans who campaigned on adamant antidebt promises are saying, Hell, no — at least not without deep spending cuts that Democrats refuse to make. Now the issue is coloring the 2012 presidential campaign, as several potential candidates, including former House Speaker Newt Gingrich and former Minnesota governor Tim Pawlenty, have come out against raising the debt without slashing billions of dollars in spending at the same time.

Both parties are trying to figure out who has the most leverage — and the most to lose if they miscalculate. The GOP will hammer Obama as a reckless free spender. Democrats are encouraged by the memory of the 1995 budget fight between House Republicans (then led by Gingrich) and Bill Clinton, which led to a government shutdown. Clinton, who came off looking more responsible than Gingrich, used the showdown to turn around his presidency. Encouraged by this history, Obama may look to frame the debate to his advantage in the Jan. 25 State of the Union address. "It will be brinksmanship," says a senior House Democratic aide. "I'm trying to think this through myself."

But Republicans argue that they hold far more cards today, thanks to a debt far larger — and far more alarming to the public — than it was 16 years ago. They will seek to attach perhaps as much as tens of billions of dollars in spending cuts — an amount they'd be unlikely to slip through the regular budget process — to any bill boosting Uncle Sam's IOU account. "If they want us to help pay their bills, we're going to cut up their credit card," says Michael Steel, a spokesman for House Speaker John Boehner. And if Obama balks at the cuts? "We'll see."