The world’s largest economy once more faces the threat of default unless the US Congress raises the debt ceiling, but feuding between Barack Obama and foes may not push the nation to the brink this time.

Republicans on Capitol Hill are keen to avoid a repeat of the kind of crippling fiscal showdown like the one in October that brought the government to the brink of default and prompted a 16-day shutdown.

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But, with a budget deal now concluded and campaigns kicking off for mid-term November elections, conservatives are nevertheless staking out their positions with a February debt ceiling deadline looming.

They want the Democratic president to agree to debt reduction measures in exchange for any extension of borrowing, and say such a move is simply prudent politics.

The White House calls such efforts “ransom threats.”

By law, Congress sets a cap on the level of public debt, beyond which the US Treasury can not borrow.

Lawmakers regularly raise that ceiling to allow government to pay its bills — notably creditors on international financial markets but also the pensions and benefits of Americans and state expenditures.

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Treasury Secretary Jacob Lew has warned that the debt ceiling will be reached in late February.

In October, Congress authorized borrowing through February 7, but Treasury estimates it can use extraordinary measures to provide an additional three weeks of cushion.

“I really don’t expect the same kind of melodramatic confrontation as in October,” Steve Bell, senior director of economic policy at the Bipartisan Policy Center, told AFP on Monday.

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In last year’s standoff, Republicans tried in vain to torpedo Obama’s health care reform law as part of the debt ceiling deal. The president did not flinch, and Republicans were left licking their wounds.

“When push comes to shove they’re not going to come close to defaulting on the debt again,” Bell added. “They’re going to take a more prudent course.”

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The White House is signalling once again that it will not waver.

“We’re doing it the exact same way we’ve done this from before, which is we were not going to pay them ransom. Nothing has changed in our position,” White House senior advisor Dan Pfeiffer told Fox News.

But top Senate Republican Mitch McConnell made clear it was “irresponsible” for Obama to ask for a clean debt ceiling hike with the country mired in $17 trillion in debt and counting.

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“We ought to attach something significant for the country to his request to increase the debt ceiling,” McConnell told Fox.

Waning Tea Party influence

After losing by the October fight, conservatives are opting for more modest measures, like legislation to prohibit the government from bailing out insurance companies if they suffer losses within the health care system’s framework.

But Bell said it would be highly unlikely for Democrats to cave on any aspect of Obamacare, the president’s signature domestic initiative.

He predicted instead they could move on something that Obama could do with the stroke of a pen: approving construction of the Keystone XL oil pipeline, on hold for years over environmental concerns.

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“We need not have a default,” McConnell said, citing Keystone as a possible element of a deal.

But McConnell said the staggering size of the debt — which at 2013 stood at 106 percent of gross domestic product, according to the Congressional Budget Office — should force spending cuts.

With a potential showdown lingering, eyes were on Tea Party conservatives in the House, where the faction’s few dozen intransigent lawmakers have played a key role in congressional paralysis.

“We shouldn’t just write a blank check,” Senator Ted Cruz, a Tea Party favorite who coordinates with House conservatives, warned on CBS.

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The Republican image took a hit from October’s crisis and party leaders sought to re-assert control of the troops, recently backing a compromise that brings some stability back to the budgeting process.

House Republicans meet Wednesday for a three-day retreat outside Washington. The goal: game out the strategy of the coming weeks and emerge united on the debt-ceiling front.

[Image via Agence France-Presse]