May 4, 2011
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 Chairman Kent 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.”
People sense we’re in bad shape
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. Vice President Biden is scheduled to begin a series of meetings Thursday with Democratic and GOP representatives from both the House and the Senate, while the Senate’s so-called “Gang of Six” Democrats and Republicans struggle to agree on a bipartisan budget plan along the lines proposed by the president’s fiscal commission last November. 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.
‘If we don’t send a signal that we’re serious
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.”
Isakson said that enacting a balanced budget amendment or installing a cap to total government spending, such as the one proposed by Sens. Bob Corker, R-Tenn., and Claire McCaskill, D-Mo., which would limit government spending to 20.6 percent of gross domestic product starting in 2013, “would make a lot of difference in terms of people’s willingness to cooperate on raising the debt ceiling in the Senate,” he said. According to a McClatchy-Marist poll released last month, 69 percent of registered voters oppose raising the debt ceiling, including 79 percent of Republicans.
Some budget experts say that such steep political divisions could result in a series of short-term debt ceiling increases, similar to the way Congress and the White House handled short-term spending measures culminating in a final deal on a fiscal 2011 funding bill last month. “There are a lot of things between ‘let’s pass a comprehensive plan,’ and ‘let’s not increase the debt ceiling,” said Marc Goldwein, policy director of the Fiscal Policy Program at the Committee for a Responsible Federal Budget
Identical House and Senate bills unrolled by Rep. Tom McClintock, R-Calif., and Pat Toomey, R-Pa., which would force the Treasury to pay its’ foreign investors before paying out other areas of the federal budget if the statutory debt limit is passed are also garnering support in Republican circles. For some Republicans--particularly in the House-- even enactment of a spending cap or balanced budget amendment won’t necessarily win their votes to raise the debt ceiling.
‘It’s like we’re at budgetary fat camp, and
people are worried that as soon as Jillian of
the Biggest Loser stops screaming at us we’re
going to go back to eating candy bars and doughnuts.’
“I’m not sure that anything would get me to vote for an increase,” said Tim Scott, R-S.C., a freshman who aligns with the Tea Party. “I think we’re already experimenting with financial sanity--the gambling’s already happening, so the question is how we manage this gamble and make it a calculated risk as opposed to chance. “
“I don’t think anybody buys the Armageddon tomorrow scenario that some are painting if we fail to raise the debt ceiling,” said Jeff Flake, R-Ariz., a member of the Appropriations Committee, adding that his constituents are more concerned than ever that the deficit will go on unaddressed. “If we don’t send a signal that we’re serious about our debt and deficit, than in my mind that’s just as big of a risk, or a bigger risk, than not raising the debt limit without spending cuts.”
“People in my district just aren’t convinced we are changing our behavior,” said freshman Rep. Bill Huizenga, R-Mich. “It’s like we’re at budgetary fat camp, and people are worried that as soon as we’re done having Jillian of the Biggest Loser screaming at us in our face we’re going to just go back to eating candy bars and doughnuts,” he said, adding that he needs to see some “real reform” before he considers voting for an increase.
Some Democrats share that view. “As catastrophic as it would be to fail to raise our debt ceiling, it’s even more irresponsible to not take this opportunity to own up to our unsustainable spending path,” said Mark Udall of Colorado, a moderate Democrat. “If we don’t take action to reduce our deficit spending, Congress will be facing this same debt ceiling vote in the near term – still with no end to our deficits in sight. For too long we have put off the tough decisions for ‘next time,’ and Coloradans are fed up with it.”
Though the vast majority of Democrats are willing to vote for an increase without spending reductions, many acknowledge that a debt ceiling hike without spending constraints is unlikely to pass, and that they will have to go along with spending cuts. “I would like a straight up or down vote, but the realities are that it won’t be. The question is what price raising it will come at,” said Colleen Hanabusa, of Hawaii, one of the nine Democratic freshmen in the House.
Jennifer DePaul of the Fiscal Times contributed to this report.
Debt Ceiling: Investors Aren’t Worried (NPR)
GOP May Stage Debt Ceiling Test Vote (UPI)
Debt Ceiling Debate a Dangerous High-Wire Act (Reuters)