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Republicans may use debt limit to leverage spending cuts

House Speaker John Boehner holds a news conference at the U.S. Capitol in Washington March 21, 2013. REUTERS/Gary Cameron
House Speaker John Boehner holds a news conference at the U.S. Capitol in Washington March 21, 2013. REUTERS/Gary Cameron

By Rachelle Younglai

WASHINGTON (Reuters) - House Speaker John Boehner and his fellow Republicans say they are preparing to use the next debt limit deadline to fight for further spending cuts and major changes to federal healthcare and retirement programs.

Boehner's demand that any debt cap increase be matched with commensurate budget savings sets up Republicans for another fiscal battle with the Obama administration and a possible repeat of the 2011 debt limit brawl that cost the United States its top credit rating.

"Dollar for dollar is the plan," Boehner told reporters on Thursday after the House passed a budget for next year that would cut domestic programs drastically but is not going to be approved by the Democratic-controlled Senate.

The government is on track to hit the limit on how much it can borrow around May 19. The U.S. Treasury can use emergency maneuvers so the administration can continue to pay bills such as interest on its debt.

But those measures are expected to run their course in July or August and Congress will have to raise the ceiling again or risk a damaging debt default.

In Boehner's weekly press conference, the speaker added that while he will seek cuts, he was "not going to risk the full faith and credit of the federal government."

His office later said Boehner's goal was not to default but to extract spending cuts from the administration of President Barack Obama.

Whether he and other Republicans will make good on their threat is an open question. In January, after months of saying they would block an increase in the debt limit unless Obama offered significant cuts, Republicans switched gears and extended the borrowing authority through May.

"We need to make sure that we have ... some real entitlement reform or real cuts," Representative Raul Labrador told reporters at a meeting of conservative lawmakers this week.

Without meaningful deficit reduction, "I don't think anybody here (House Republicans) will support the raising of the debt ceiling," the Idaho Republican said.

Kansas Republican Representative Tim Huelskamp, who was also at the meeting, said the debt ceiling remained the best opportunity to do something about the country's debt burden.

"This is going to be where the rubber meets the road," he told reporters.

Republicans argue that even if they fail to raise the debt limit, Congress could avoid default by instructing the Treasury to prioritize its various payments, putting bondholders first.

"We're willing to lay that out in law, to try to maybe create a statute that maybe makes it explicit," Representative Steve Scalise, the head of the largest group of House conservatives, told Reuters.

(Editing by Fred Barbash and Todd Eastham)

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