US borrowing ceiling crisis nears, nerves jangle
Pushing the US borrowing ceiling to its limit, including extraordinary measures, is about to become exhausted. According to Treasury Secretary Jacob J. Lew in a letter to John Boehner the House Speaker, the deadline for Congress to raise the ceiling is probably February 27th.
In his letter, Lew says it would be a mistake to wait until the last minute. As soon as the current extraordinary measures run out, money would be exhausted rapidly, he added.
After February 27th Lew doubts there will be more than $50 billion in cash available. This will not last long, he warns, “Net daily expenditures for the government can be as high as $60 billion on certain days.”
So far, no bill has been introduced. Eric Cantor, House Majority Leader, is said to have included details on raising the US borrowing ceiling in the schedule for votes for next week.
Republican Congress lawmakers say they want concessions if an agreement on suspending the debt limit is to be made. Unfortunately, they do not appear able to agree on the details, which may eventually include, according to three Republican ‘anonymous’ sources who spoke to Bloomberg News, preventing reductions in doctors’ Medicare payments or restoring cost-of-living adjustments for retired military personnel that were cut last year in a budget deal.
This would be a considerably toned down demand list compared to what Republicans wanted last year, and may be acceptable to the majority of Democrats.
The Senate, which has a Democrat majority, is set to start considering a bill that would restore non-disabled military retiree pensions, though nobody yet knows where the money to pay for this would come from.
What happens if Republicans cannot get support for a deal?
The US debt limit’s suspension that was established by Congress in October 2013 expired on February 8th. Members of the House have not discarded a debt-limit increase without conditions if the Republicans are unable to gather enough votes for a plan.
Congress does not plan to meet between the February 17th to 24th.
Technically, a suspension does not increase the debt ceiling, but allows the Treasury to continue borrowing as required in order to pay the nation’s bills, thereby averting a default. The advantage of a suspension for lawmakers is that they do not go on record as having approved an increase.
A federal government default would be devastating
In a letter to Senate Majority leader Harry Reid, Representative Speaker John Boehner, Senate Minority Leader Mitch McConnell, and Representative Minority Leader Nancy Pelosi, the Business Roundtable wrote:
“Any default by the federal government on its debts would cause devastating, long-lasting effects for all Americans. Further, prolonged inaction that takes the government up to the precipice would foster uncertainty, dampen consumer and business confidence, risk higher borrowing costs, and could have immediate consequences for hiring and investment.”
“To be clear, we encourage Congress and the Administration to tackle the root causes of America’s unsustainable debt and pursue policies that set the country on a long-term path to growth and prosperity. But in the near term policymakers should address the debt ceiling so they can focus on implementing policies more fundamental to fostering economic growth. These include enacting tax reform, fixing America’s broken immigration system and passing modernized Trade Promotion Authority legislation to advance U.S. trade agreements.”
On Thursday, House Majority Leader Eric Cantor said on the House floor:
“I’m confident that the United States is not going to default on its debt and we will resolve the need to increase the borrowing authority of this country prior to any deadline that the Treasury issues.”