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Skating Close to the Edge, Again, on the Debt Ceiling

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During the October 2013 government shutdown, The Times’s David Leonhardt explained the debt limit and how a failure to raise it could have affected the economy both at home and abroad.CreditCredit...Jacquelyn Martin/Associated Press

WASHINGTON — Here they go again.

As of Friday, the Treasury will no longer have the authority to issue bonds as necessary to pay the government’s bills. In a matter of weeks, the government could run out of cash and begin defaulting on some payments unless Congress acts to raise the official ceiling on the national debt. And once again, Congress is struggling to avoid a potential fiscal and economic train wreck.

But this fourth debt ceiling standoff in three years is taking place in an atmosphere of fatigue and caution rather than brazenness and conviction. A confrontational parliamentary tactic that came in with a bang might finally be exiting with a whimper.

“This is the dying gasp of a dead-end strategy,” said Representative Peter Welch, a Vermont Democrat. “I think this fight is over.”

Even as some Republicans continued to hunt for one policy concession or another to demand from Democrats in exchange for lifting the ceiling, leadership has indicated it has no appetite for brinkmanship — particularly as Republicans head into a midterm campaign for control of Congress where they feel they have an upper hand, given the botched rollout of the Affordable Care Act and President Obama’s low approval ratings. And the White House has made clear that it has no intention of giving Republicans anything in exchange for increasing the limit.

“I think that we’re still looking for the pieces to this puzzle,” House Speaker John A. Boehner of Ohio said at a news conference on Thursday. “But look, we do not want to default on our debt, and we’re not going to default on our debt. We’re in discussions with members about how we can move ahead.”

But there is always a risk, remote as it may be, that something could go wrong. The Obama administration has warned that Congress has less time for its deliberations — even if they are less heated — in the latest merry-go-round.

In the past, the Treasury has managed to keep paying the bills for months after hitting the debt ceiling, using “extraordinary measures” to move cash from pocket to pocket. But it is currently sending out billions of dollars of tax refunds, warning that Congress probably has only until the end of the month to act.

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Jacob J. Lew, the Treasury secretary, said: “The bottom line is: Time is short.” The limit expires on Friday.Credit...Saul Loeb/Agence France-Presse — Getty Images

“The bottom line is: Time is short,” said Treasury Secretary Jacob J. Lew, speaking in Washington this week. “Congress needs to act to extend the borrowing authority for our nation, and it needs to act now.”

At the moment, a showdown over the debt ceiling seems to be the furthest thing from investors’ minds. Instead, Wall Street is focused on signs of trouble emanating from emerging-market countries like Turkey, Argentina and South Africa and worries over whether growth in both China and the United States is about to falter.

“The broader markets couldn’t care less,” said Ajay Rajadhyaksha, the head of global fixed-income strategy for Barclays Capital.

In part, Mr. Rajadhyaksha said, that is because Wall Street has become better at reading the signals coming from Washington after repeated standoffs that were ultimately resolved without a catastrophe. Three years ago, “nobody knew what the exchange stabilization fund was,” he said. “Nobody knew what the G-fund was,” he said, referring to accounts that the Treasury tweaks to free up money after it hits the debt ceiling.

“Markets understand this process considerably better,” he said, “and because of what they’ve learned the past few times, they’re very sanguine at the moment.”

But even with markets calm, uncertainty stemming from policy impasses in Washington remains a threat — not just because of the unknown consequences of default for the value of Treasury securities.

Flirting with default comes with costs, even if the government never misses a single payment, experts said. A new study from the Peterson Institute for International Economics, a research group based in Washington, suggested that the cost of last year’s fiscal standoffs lopped roughly a percentage point, or $150 billion, off economic output and cost 750,000 jobs.

Around the world, the perception of Treasury debt as being absolutely safe has shifted, said Adam S. Posen, president of the Peterson Institute and a former central banker at the Bank of England. Managers of sovereign-wealth funds in countries like Norway and Singapore are rethinking their exposure to the dollar, he said.

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John Boehner, speaker of the House, said, “We’re still looking for the pieces to this puzzle.”Credit...Larry Downing/Reuters

“The dumb money says, ‘Every time I reacted to a debt deliberation in the United States, I overreacted and lost money,’ ” he said. “But the smart money knows the market has been changed by this uncertainty.”

In the last few weeks, Republican leaders have trotted out various ideas in hopes of coming up with a plan that would win at least 218 Republican votes in the House, enough to pass a measure without Democratic support. These have included tying the debt ceiling to approval of the Keystone pipeline or to a repeal of a provision in the Affordable Care Act that shelters insurers from higher-than-anticipated claims. But none of those has succeeded.

“You know, Mother Teresa is a saint now, but if Congress wanted to make her a saint, and attach that to the debt ceiling, we probably couldn’t get 218 votes for it,” Mr. Boehner said Thursday.

A Republican leadership aide said that Mr. Boehner was trying to develop a proposal that would also bring in some Democratic votes. That might include reversing an unpopular cut to military pensions or tweaking Medicare payments to doctors.

Publicly, Democrats are insisting on a “clean” debt ceiling bill, saying they won’t bow to blackmail by Republicans.

“They are just throwing ideas against the wall to see what sticks, and creating more uncertainty,” said Senator Patty Murray of Washington, the Democratic chairwoman of the Senate Budget Committee. “It’s time for House Republicans to find their way out of this mess the same way they always do: by agreeing to raise the debt ceiling without any strings attached.”

Whatever the outcome, serious damage has already been done to America’s status in the global economy.

“The United States has benefited for decades by standing out for the quality of its governance,” Mr. Posen said. “We’re not Italy. We’re not Greece. Now, we’re just willfully closing that gap.”

A version of this article appears in print on  , Section B, Page 1 of the New York edition with the headline: Skating Close to the Edge, Again, on the Debt Ceiling. Order Reprints | Today’s Paper | Subscribe

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