Reid and his team argue failing to raise the debt ceiling would threaten the credit of the U.S. | REUTERS Reid to Obama: OK to skip Congress

Senate Majority Leader Harry Reid and other top Democrats are putting new pressure on the White House to circumvent Congress to boost the nation’s debt ceiling if no bipartisan agreement can be reached.

In a strongly worded letter to President Barack Obama obtained by POLITICO, Reid and his leadership team argue that failing to raise the $16.4 trillion debt ceiling would threaten the full faith and credit of the United States. Reid and Sens. Dick Durbin, Chuck Schumer and Patty Murray asserted that Obama “must make clear that you will never allow our nation’s economy and reputation to be held hostage.”


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“In the event that Republicans make good on their threat by failing to act, or by moving unilaterally to pass a debt limit extension only as part of an unbalanced or unreasonable legislation, we believe you must be willing to take any lawful steps to ensure that America does not break its promises and trigger a global economic crisis — without congressional approval, if necessary,” the Friday letter to Obama says.

The letter amounts to the most concerted push yet by Senate Democratic leaders for the White House to take unprecedented action to raise the debt ceiling given the bitter stalemate in Congress. After the messy debt ceiling fight from 2011, and the protracted fiscal cliff battle that extended until New Year’s Day, Obama has said he will not use the debt ceiling increase as a bargaining chip and will refuse to negotiate with GOP leaders on the issue.

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But Republicans have demanded that dollar-for-dollar spending cuts must accompany any increase in the debt ceiling. And after agreeing to raise marginal income tax rates on high earners as part of the fiscal cliff deal, Republicans refuse to consider any new revenue as part of a debt-ceiling accord. Democrats say taxes must be part of any deal.

In addition, many conservative Republicans are not convinced that failure to lift the debt ceiling — which will be reached as early as next month — would constitute immediate default by the U.S. government. These Republicans believe that the U.S. government can continue to make interest payments to debt holders without defaulting.

“The fact that we continue hitting the debt ceiling is a symptom of Washington’s spending problem, and hitting the debt ceiling does not immediately trigger a default,” said Rep. Steve Scalise (R-La.), chairman of the powerful Republican Study Committee, in a statement on Thursday. “The Treasury Secretary has an obligation to preserve the credit rating of the United States and should pledge to continue making necessary interest payments to avoid default.”

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Following the prolonged 2011 debt fight, the credit rating agency Standard & Poor’s downgraded U.S. debt, and analysts warn more downgrades could be possible, which could have dire consequences for the American and global economies.

Hill Democrats, for their part, are worried that they lack the leverage in the debt ceiling battle and stand to lose big in any deal cut between the White House and congressional Republicans.

Democrats privately grumble that Obama and Vice President Joe Biden “gave away” the issue of tax increases as part of the fiscal cliff deal. Without being able to include taxes - more specifically, tax cuts for some income groups — Democrats fear that Obama will have nothing to counter GOP arguments calling for steep reductions in entitlement programs like Medicare and Medicaid.

And if Obama listened to Democratic leaders and circumvented Congress, it would undoubtedly generate furious protests from Republicans and could spawn a constitutional crisis over the scope of presidential authority.

House Democrats, including Minority Leader Nancy Pelosi, have been pushing Obama to invoke his power under the 14th Amendment — to ensure the validity of public debt — and unilaterally act to avoid default, ignoring Congress in the process.

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The White House has repeatedly said it does not believe it has the power under Section Four of the 14th Amendment to avoid seeking congressional approval for a debt ceiling increase, although the Obama administration has come under pressure from its allies to find other ways around the legislative battle and reconsider its position.

Most recently, the idea of allowing the Treasury Department to mint a “$1 trillion dollar coin” and deposit it at the Federal Reserve in order to wipe away $1 trillion in liabilities has generated buzz in Washington. But some legal experts question the validity of such a move, and its unclear if Wall Street and other financial markets would punish such maneuvering as mere partisan sophistry and not a real solution to a serious fiscal problem.

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The White House has downplayed the idea but did not completely rule it out earlier this week.

“There is no Plan B, there is no backup plan,” said White House spokesman Jay Carney. “There is Congress’s responsibility to pay the bills of the United States.”

Senate Minority Leader Mitch McConnell (R-Ky.) accused the Democratic leaders of trying to avoid the problem. “With the president asking Congress to raise the debt ceiling, Democrats in Washington are falling all over themselves in an effort to do anything they can to get around the law — and to avoid taking any responsibility for Washington’s out-of-control spending,” McConnell said in a statement Friday.