Members of Congress returning to work after a long recess were greeted Tuesday by news that they have additional time – until early August — to negotiate a plan with the White House for raising the debt ceiling to avert the first default ever on federal borrowing.
But Democratic and Republican lawmakers remain deeply divided over how – or even whether – to link the debt ceiling issue to addressing the country’s long term debt and entitlement woes, as House Speaker John Boehner, R-Ohio, and other GOP leaders are demanding.
In addition, several senior Democratic senators yesterday voiced annoyance with Treasury Secretary Timothy Geithner for announcing that a greater-than-expected increase in tax revenue has extended the deadline for breaching the debt ceiling by nearly a month, from July 8 to August 2. Geithner has been warning for months that failure to raise the debt ceiling would trigger an economic catastrophe, but his announcement on Monday took a little pressure off the White House and Congress to reach a compromise in the next few weeks.
From a strategic standpoint, the earlier debt ceiling deadline created a sense of urgency for the two parties to reach a comprehensive agreement on long term spending, taxes and entitlements. Some Democrats have accused the Republicans for being reckless with the economy by making threats to oppose a new debt ceiling with the deadline looming.
Senate Budget Committee ChairmanKent Conrad, D- N.D., told The Fiscal Times that while the Treasury announcement doesn’t make a “material” difference, “I kind of think pressure is good . . . it’s helpful in getting people to focus on actually facing up to this issue.”
Sen. Benjamin L. Cardin, D-Md., a member of the Budget and Finance committees, said that Geithner’s announcement wasn’t “necessarily good,” adding that: “We have to reach a compromise sooner rather than later, so I don’t think pushing it off helps us any.”
fiscally, but they don’t understand yet
why Medicare and Social Security are
unsustainable in their current form.
Senate Majority Leader Harry Reid, D-Nev., told reporters after a Senate Democratic luncheon that the Treasury announcement had given Congress and the White House “some time to do some very good work” on the budget and spending issues. However, another high-ranking Senate Democrat signaled off the record that he was troubled by the timing of Geithner’s announcement, and that “I want to talk with him and see what his thinking was.”
Federal borrowing is still likely to reach the current $14.3 trillion legal limit on May 16, but the combination of the unexpected surge in income tax revenues and the Treasury’s series of emergency steps, including postponing government fund investments in Treasury notes and bonds, will now carry the government to August 2 before it legally runs out of borrowing authority.
A spokesperson for the Treasury told The Fiscal Times yesterday that Geithner believes it is important for Treasury to be transparent in providing these estimates in order to ensure that Congress has the schedule information it needs to avoid overshooting the deadline.
“That's why the Secretary committed earlier this year to provide Congress with monthly estimates of when the debt limit would be reached and the duration of the extraordinary measures,” said Colleen Murray, the Treasury spokesperson. “These calculations are made by career professionals at Treasury, not political appointees, and no political or strategic considerations enter into the estimates."
Sen. John Cornyn III, R-Tex., a member of the Budget and Finance Committees, defended the Treasury announcement, saying that the extra time would be useful in trying to forge a budget and debt ceiling compromise. “Hopefully, it gives us a little more time to educate the American people,” Cornyn said. “I think they sense we’re in bad shape fiscally, but they don’t quite understand yet why Medicare and Social Security are unsustainable in their current form. So we need a little more time. And frankly it’s nice to have it.”
Both the administration and congressional GOP leaders have pledged to reduce the deficit by $4 trillion over the coming decade or so. However, Republican leaders are insisting that a detailed budget deal or spending caps be linked to raising the debt ceiling, while President Obama and Democratic leaders including Reid argue that they should be handled separately.
about our debt and deficit, that’s a bigger risk,
than not raising the debt limit without spending cuts.’
“An unfettered lifting of the ceiling, without any consideration of the deficit and debt problem is just unthinkable right now,” said Sen. Johnny Isakson, R-Ga. “Anybody can find any excuse they want to, but now is the time, and a straight up or down vote would send a sign to our investors around the world and our partners around the world that we’re looking the other way at the most serious problem we have right now.”