CHN: Pressing Up Against the Debt Ceiling
Treasury Secretary Jacob Lew is warning that Congress must avert disaster by acting to raise the debt ceiling by November 3rd when the United States will reach its borrowing limit. Congress has the sole authority to increase the amount the Department of the Treasury can borrow to pay its bills. Annual deficits, projected to be $469 billion in 2015, have been steadily decreasing since a record $1.4 trillion deficit in 2009. The debt however, which is comprised of cumulative annual deficits, is nearing the $18.1 trillion limit on Treasury’s borrowing authority.
Since March, the Treasury has been using ‘extraordinary measures’ to extend borrowing authority. Those measures include moves like delaying scheduled payments into pension funds. Economists and business leaders overwhelmingly agree that failure to raise the debt ceiling would do catastrophic damage to economies and markets worldwide. In recent history this hasn’t stopped Congress from reaching the brink of disaster before raising the debt ceiling. This year appears to be no exception.
In the Budget Control Act (BCA) of 2011, Republicans secured tight caps on domestic and Pentagon discretionary programs in exchange for increasing the debt limit. The BCA also established a Super Committee to come up with an additional $1.5 trillion in deficit reduction. The failure of that Committee to act resulted in further cuts, mostly to discretionary programs, known as ‘sequester’ caps which took effect in FY 2013. The $85 billion Ryan/Murray budget agreement replaced about one-half of the domestic spending sequester cuts in FY 2014 and one-fourth of them in FY 2015. Unless Congress acts, the full impact of the sequester cuts will again be felt in FY 2016. Since 2011, the Administration has been adamant that they will not negotiate increases in the debt ceiling. There must be ‘clean’ extensions without budget-cutting provisions. Since 2011, Congress has agreed to three clean extensions of the debt ceiling.
While little time remains until November 3rd, that has not kept conservative House Republicans from passing legislation that has zero chance of becoming law. On October 21st it passed H.R. 692, the Default Prevention Act. The bill would have required the Department of the Treasury to continue to pay the principal and interest on the debt held by the public or the Social Security trust funds while leaving many of its bills unpaid. The Administration issued a statement saying that if the bill came to the President’s desk he would veto it. The statement read in part, “Any legislative proposal to prioritize certain payments over others is default by another name and would not protect the full faith and credit of the United States government or avoid the negative impact of default on American jobs and businesses….It would cause the Nation to default on payments for Medicare, veterans, national security, and many other key priorities. Making some payments while not making others would be unacceptably risky and unfair to the American people.” The bill passed 235-194, with 9 Republicans joining all Democrats in opposing H.R. 692, while 235 Republicans voted for it. The Senate will not consider the bill.
House Republicans have also weighed other proposals, including one that contained changes to entitlement programs in exchange for raising the debt ceiling, but have not attempted to bring any of those to a vote. Given the late date and the Administration’s non-negotiation stance, it appears that outgoing Speaker John Boehner (R-OH) will bring a clean increase in the debt ceiling to the floor in time for the Senate to act before the November 3rd deadline. All 188 House Democrats would likely vote for the bill, meaning at least 30 Republicans would need to vote ‘yes’ for the bill to pass, so far an uncertain outcome. The Senate would likely reach the 60-vote threshold to pass the bill.