President Obama predicted Republicans won’t follow through on threats to shut down the government next month over disagreements about federal spending and his health-care law, saying such a move would risk a new economic crisis as the U.S. is recovering.
“I’m assuming that they will not take that path,” Obama said in a White House news conference the day before he’s to leave for a family vacation in Martha’s Vineyard, Massachusetts. “I have confidence that common sense in the end will prevail.”
Obama again defended the health-care law, which phases in coverage for 30 million uninsured people including those with preexisting conditions, saying Republicans have made blocking it an “ideological fixation” and “their holy grail.”
When members of Congress return from their August recess, they and the president will confront a host of decisions on the economy, including determining federal spending levels and the government running up against its $16.7 trillion debt limit.
Republican lawmakers are threatening a default or government shutdown as they demand spending cuts while Obama argues for infrastructure improvements, expanded educational opportunities and more support for research -- a recurring drama in negotiations over the nation’s deficit since 2011.
Obama also touched on the need to revise immigration laws, relations with Russia, government surveillance programs and the process of selecting a new Federal Reserve chairman.
He rejected the idea of shutting “the government at a time when the recovery is getting some traction, where we’re growing, although not as fast as we need to, where the housing market is recovering, although not as fast as we would like, that we would precipitate another crisis here in Washington.”
The White House wants Congress to turn off automatic budget cuts, known as sequestration. The president has said he won’t sign a series of stopgap funding bills until it’s dealt with. Many Republicans in Congress are demanding reduced spending for entitlement programs before sequestration is modified or turned off, an offer opposed by the White House.
The federal budget deficit narrowed from more than 10 percent of the gross domestic product at the end of 2009 to 5.7 percent of GDP for the 12 months ended March 31 -- the smallest gap in four years, according to data compiled by Bloomberg.
With tax collections rising and spending growth slowing down, the deficit is on track to drop to 4 percent of the $16 trillion U.S. GDP for the fiscal year ending Sept. 30, according to a May forecast by the Congressional Budget Office. It will shrink to 3.4 percent of GDP next year, the CBO says, close to the 3.3 percent average over the past 30 years, according to data compiled by Bloomberg.
The improving budget outlook hasn’t eased the partisan battles over federal finances. Legislation to fund highway, aviation, rail and other transportation projects for next year collapsed last week in the House and the Senate, reflecting a stalemate over the budget.
Congress is now on a five-week break and won’t return until Sept. 9, just three weeks before government funding runs out. In November, the U.S. government is expected to reach the debt limit.
Bond investors have been unfazed by the stalemate in Washington.
In 2011, after months of lawmakers fighting over raising the nation’s debt limit, Obama signed the increase into law on Aug. 2 of that year, the day the Treasury Department warned that U.S. borrowing authority would expire.
Credit markets disregarded the standoff, with yields on 10- year Treasury notes declining to 2.61 percent on Aug. 2 of that year, from 3.18 percent on July 1, 2011, and continued to fall to 1.88 percent at year-end. Yields on 10-year Treasuries fell one basis point, or 0.01 percentage point, to 2.58 percent as of 4:59 p.m. New York time, according to Bloomberg Bond Trader data.
Lawmakers also will return to consider an overhaul of immigration policy. Obama said he sees “a strong bipartisan vote coming out of the Senate” while in the House of Representatives, “internal caucus politics” threaten to prevent votes on an overhaul. “That’s what the American people don’t want us to be worrying about,” Obama said.
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