The debt ceiling thread

[Puppycow]

For discussing news about the approaching debt ceiling.

Looks like the can may be kicked a little bit further down the road:

GOP Weighs Short Debt-Limit Rise (Wall Street Journal)

WILLIAMSBURG, Va.—House Republicans appeared to be coalescing around a proposal to approve a short-term increase in the government's borrowing limit to give them time to use two other budget deadlines to win spending cuts they are demanding.

House Budget Chairman Paul Ryan (R., Wis.) the party's vice-presidential nominee last fall, advanced the idea during a closed-door session with other House Republicans Thursday, the second day of their retreat at a resort in Williamsburg, Va.

"We're discussing the possible virtue of a short-term debt limit discussion so we have a better chance of getting the Senate and the White House involved in discussions in March," he said.

The proposal was one of several discussed during a wide-ranging strategy session, and no final decisions were made. But several members expressed support for it afterward.

Rep. John Fleming, a conservative Republican from Louisiana, said Speaker John Boehner (R., Ohio) liked the idea of a short-term debt ceiling increase, as did many rank-and-file GOP lawmakers. "We're all pretty much on board," he said. "I don't mean that every single person is going to vote for it, but as a working principle, I think we're all pretty solid on it."

 

[Cain]

Grover Norquist talked about this idea over a year ago. Using the debt ceiling as a kind of monthly allowance: "If you're good, we raise it."

 

[Puppycow]

Well the first one is apparently a freebie. I think the American people would get mighty tired of this "government by perpetual crisis" approach.

This can-kicking suggests to me that Republicans aren't exactly spoiling to have this fight. I see it as a sign that Obama has the upper hand.

 

[Puppycow]

A couple stories related to this:

Poll: Most see damage if US debt limit not raised

WASHINGTON (AP) — Most Americans think jarring economic problems will erupt if lawmakers fail to increase the government's borrowing limit. Yet they're torn over how or even whether to raise it, leaning toward Republican demands that any boost be accompanied by spending cuts.

According to an Associated Press-GfK poll, 53 percent say that if the debt limit is not extended and the U.S. defaults, the country will face a major economic crisis. An additional 27 percent say such a crisis would be somewhat likely, while just 17 percent largely dismiss the prospects of such damage.

. . .

When asked which political path to follow, 39 percent of poll respondents support the insistence by House Speaker John Boehner, R-Ohio, and Senate Minority Leader Mitch McConnell, R-Ky., that deep spending cuts be attached to any measure increasing the debt ceiling. That's more than the 30 percent who back Obama's demand that borrowing authority be raised quickly and not entwined with a bitter fight over trimming the budget.

An additional 21 percent oppose boosting the debt ceiling at all.

If we assume that the 21 percent who oppose boosting the debt ceiling at all also favor deep spending cuts (because that would be the effect of not raising the debt ceiling) that's 60% who favor spending cuts.

Except when you ask them about anything specific, those majorities disappear:

When it comes to finding savings to balance the budget, nearly half prefer cutting government services as the GOP wants, 3 in 10 would rather increase taxes and about 1 in 10 would do both. The percentage backing cuts in federal services has dropped 13 percentage points since the spring of 2011, while the number supporting tax cuts has changed little.

The poll also highlighted how public support dwindles when people are asked about specific cuts.

Given four ideas for reducing budget deficits, only one got majority support: charging top earners higher Medicare premiums, backed by 60 percent. That included roughly even proportions of Democrats and Republicans, and majorities of all income groups in the poll.

Only 30 percent back slowing the growth of annual Social Security benefit increases, which Obama agreed to accept in failed talks with Boehner on crafting a deficit-reduction compromise during the "fiscal cliff" fight. Just 35 percent support gradually raising the current Medicare eligibility age of 65, and 41 percent support defense cuts.

The one specific idea that got majority support isn't even a spending cut at all, it's a tax raise on "top earners".

Fitch warns that debt-limit delay could hurt U.S. credit rating

WASHINGTON — As Congress again veers close to the nation's debt limit, a leading credit rating company is delivering a stark warning: Don't wait until the last minute.

Fitch Ratings said Tuesday that the U.S. could lose its AAA credit rating if lawmakers don't raise the $16.4-trillion debt limit in a "timely manner" as a possible default looms as early as mid-February.

Congressional Republicans want major government spending cuts in exchange for another debt-limit increase. But Fitch, one of three major credit-rating companies, said the debt limit should not be used as leverage.

"In Fitch's opinion, the debt ceiling is an ineffective and potentially dangerous mechanism for enforcing fiscal discipline," the company said.

 

[Almo]

Krugman said something interesting the other day on Fareed's show. He said [economists] know what will happen if the US goes over the fiscal cliff. We don't know what will happen if the debt ceiling isn't raised.

(Really hoping I'm remembering this right...)

 

[Puppycow]

This is interesting:

Obama ‘will not oppose’ House GOP plan to suspend debt limit until May

Forget about raising the federal debt limit. House Republicans are proposing to ignore it altogether – at least until May 18.

The House plans to vote today on a measure that would leave the $16.4 trillion borrowing limit intact but suspend it from the time the bill passes until mid-May. The declaration that the debt ceiling “shall not apply” means that the government could continue borrowing to cover its obligations to creditors until May 18.

This approach – novel in modern times – would let Republicans avoid a potentially disastrous fight over the debt limit without actually voting to let the Treasury borrow more money.

The House Ways and Means Committee unveiled the measure Monday; it was scheduled for a hearing in the Rules Committee yesterday and to hit the House floor today. In addition to postponing a partisan fight over the debt limit, the measure seeks to force Senate Democrats to negotiate over a formal budget resolution by mandating that lawmakers’ paychecks be held in escrow starting April 15 unless Congress adopts a comprehensive blueprint for spending and tax policy.

Now, under this plan, until May 18th Obama could borrow as much as he wants.

He could, for example, only borrow as much as the government needs to pay its bills during that time, but if the Treasury can sell more bonds during that time, then he could borrow more than that, which would give the government more time before it runs out of money.

All so Republicans can play a word game claiming that they didn't vote to "raise" the debt limit.

 

[Puppycow]

So that's the solution until May 18th. Basically the Republicans punted.

House GOP Caves on Debt Ceiling, Delaying Confrontation Until Spring

Speaker John Boehner failed to reach the necessary majority of 218 with Republicans alone, putting 199 votes on the tally board, while Democrats supplied the rest for a final total of 285 yeas to 144 nays.

There was never any doubt that the measure the GOP dubbed “No Budget No Pay” would pass, putting off a potential debt crisis until mid-May, but Democrats held off casting their yes votes until nearly the end of the scheduled vote period to force Republicans to step forward with their votes to support the bill. “We wanted to make it as difficult as possible for them,” says a Democratic leadership aide, who added, “It helps with primaries.”

Republicans campaigned on cutting spending and holding down the debt ceiling, and to turn around in the first month of the new Congress and violate their pledge sets them up for a primary challenge from the right. That’s precisely the scenario that Democrats believe boosts their chances to take back control of the House in 2014 and why they believe they got the best of both worlds: legislation that avoids a debt ceiling crisis, at least for now, and fodder for a 30-second ad in the next election.

I can't say I'm too pleased with Democrats playing silly partisan games with the vote either.

An interesting side note is an unconstitutional provision in the law saying that is congress doesn't approve a budget, then congress won't get paid. It's popular but meaningless because it is unconstitutional so it won't take effect until at least 2 years from now.