Obama offered debt crisis reprieve

But the retreat came with a caveat aimed at prodding Senate Democrats to pass a budget after almost four years of failing to do so – a threat to cut off the pay of politicians in either the House or Senate if their chamber fails to pass a budget this year. House Republicans have passed budgets for two consecutive years.

The idea received a frosty reception from House Democrats, but a more measured response from the White House and Democratic Senate majority leader Harry Reid.

Republicans had not settled on full details, but the measure would give the government about three more months of borrowing authority beyond a deadline expected to hit as early as mid-February, number two House Republican Eric Cantor said.

The legislation would not require immediate spending cuts as promised earlier by Republican leaders like House speaker John Boehner. Instead, it is aimed at forcing the Democratic-controlled Senate to join the House in debating the budget.

“We are going to pursue strategies that will obligate the Senate to finally join the House in confronting the government’s spending problem,” Mr Boehner told Republican politicians at a retreat in Williamsburg, Virginia.

“The principle is simple: ’no budget, no pay’.”

Republican leaders have been grappling with how to gain leverage in their battles with Mr Obama over the budget. Mr Boehner successfully won about two trillion dollars in spending cuts as a condition of increasing the government’s borrowing cap in 2011.

Mr Obama, however, was dealt a stronger hand by his re-election in November and successfully pressed through a 10-year, 600 billion-dollar increase on upper-bracket taxpayers earlier this month.

Other choke points remain, including sharp, across-the-board spending cuts that would start to strike the Pentagon and domestic programmes alike on March 1 and the possibility of a partial government shutdown with the expiration of a temporary budget measure on March 27.

Failing to meet those deadlines would have far less serious consequences than defaulting on US obligations like payments to bondholders, recipients of Social Security pension payments and myriad other commitments when the government confronts a cash crisis and can no longer borrow to make payments.

That could cause a meltdown in financial markets and would inflame voters already disgusted with Congress.

The idea for the short-term debt increase ran into opposition from House Democrats, including leader Nancy Pelosi of California, who called it a gimmick because it would set up another potential confrontation in just a few months.

Votes from Democrats may be needed to help pass the measure if Republican conservatives opposed to any increase in the debt limit withhold their support.

“This proposal does not relieve the uncertainty faced by small businesses, the markets and the middle class,” said Pelosi spokesman Drew Hammill. “This is a gimmick unworthy of the challenges we face and the national debate we should be having. The message from the American people is clear: no games, no default.”

But Senate Democrats and the White House were more cautious and sounded encouraged that Republicans seemed to be beating a tactical retreat.

“We are encouraged that there are signs that congressional Republicans may back off their insistence on holding our economy hostage to extract drastic cuts in” spending on social programmes, said White House press secretary Jay Carney.

“Congress must pay its bills and pass a clean debt-limit increase without further delay.”

But in Washington-speak, a “clean” debt limit increase means a stand-alone measure without additional items – like the “no budget, no pay” idea - attached. Mr Reid and his fellow Senate Democrats have yet to decide how they will respond to the measure, said Reid spokesman Adam Jentleson.

The “no budget, no pay” idea is backed by No Labels, a group started about two years ago by both Democrats and Republicans in hopes of easing the partisanship and gridlock that has engulfed Washington.

The Democratic-controlled Senate passed a similar idea in 2011 when unanimously adopting a measure to deny pay to members of Congress and the president if the government shuts down for lack of an agency funding bill. But top politicians like Judiciary Committee chairman Patrick Leahy, a Democrat, have argued that the idea violates a provision of the US constitution that says Congress cannot change its pay until an election has passed.

At the same time, while Democrats like Ms Pelosi protest at the idea of a short-term debt increase in the government’s 16.4 trillion-dollar debt cap, they orchestrated comparable short-term debt relief when they controlled Congress in 2009.

Under Congress’ arcane budget procedures, a congressional budget resolution is a non-binding measure that tries to set parameters for future legislation setting agency budgets and curbing government benefit programmes.

Mr Boehner has previously invoked a promise that any increase in the government’s borrowing cap would be matched, dollar for dollar, by spending cuts or “reforms” that could include curbs on the long-term growth in retirement schemes such as the Medicare health programme. Yesterday’s announcement did not repeat that specific promise.

Mr Obama’s budget is due early next month but is expected to be released several weeks later.