Obama Willing To Deal On Debt Cap

The Wall Street Journal reports:

White House officials have opened the door to a deal with Republicans that would allow the U.S. to increase its ability to borrow, potentially easing worries in financial markets that the country might default on its debt.

Softening the administration's earlier insistence that Congress raise the so-called debt ceiling without conditions, officials now say they won't rule out linking an increase of the borrowing cap with cuts aimed at reducing the deficit—even though they'd prefer to keep the issues separate.

The shift by the White House comes at a critical point in a debate about the country's fiscal future. Last week, Congress and the president inked a deal to avert a government shutdown, shifting the focus of debate to the next milestone: The point in the next few weeks when the U.S. hits its borrowing limit. Republicans in Congress insist that any vote to raise the debt ceiling be accompanied by new spending limits or other deficit-reduction efforts.

"It's fantasy to think a bill to raise the debt limit could pass the House without significant spending cuts or reforms," said Brendan Buck, a spokesman for House Speaker John Boehner (R., Ohio.) "We hope they realize that."

Coupling the debt ceiling with deficit reduction suggests a scenario in which some of the many deficit-reduction measures flooding Washington could become reality. It also sets up a high-stakes drama over the debt ceiling, with financial markets already looking anxiously towards Capitol Hill for a speedy and clean resolution.

U.S. debt reached $14.213 trillion on Friday, just $81 billion under a limit set by Congress. The country can't issue more debt, which funds the government's operations including interest payments, once it hits the ceiling.

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