Nov. 5 dead­line for Congress to act on debt limit: US Trea­sury

The China Post - - WORLD BUSINESS - BY AN­DREW TAY­LOR

The dead­line for the U.S. Congress to in­crease the U.S. bor­row­ing limit is com­ing ear­lier than ex­pected, mov­ing up to about Nov. 5.

That means the is­sue likely must be ad­dressed be­fore House of Rep­re­sen­ta­tives Speaker John Boehner leaves Congress at the end of Oc­to­ber.

Three weeks ago, U.S. Trea­sury Sec­re­tary Ja­cob Lew is­sued a less pre­cise timeline that was in­ter­preted as mid-Novem­ber or later, but he told top law­mak­ers in a let­ter Thurs­day that tax re­ceipts have come in be­low es­ti­mates and pay­ments into mil­i­tary re­tire­ment trust funds are higher than an­tic­i­pated.

The Con­gres­sional Bud­get Of­fice, which sup­plies es­ti­mates to law­mak­ers, said in Au­gust that the dead­line would be about late No- vem­ber or early De­cem­ber.

In­creas­ing the gov­ern­ment’s bor­row­ing limit above US$18.1 tril­lion is needed to pre­vent a firstever de­fault on gov­ern­ment obli­ga­tions like in­ter­est pay­ments and so­cial se­cu­rity. The gov­ern­ment has never failed to meet its obli­ga­tions and a de­fault would likely have se­vere ef­fects on in­ter­est rates and the econ­omy.

Since the limit was re­set in March, Trea­sury has em­ployed ac­count­ing ma­neu­vers known as “ex­tra­or­di­nary mea­sures” to be able to con­tinue to bor­row. Those mea­sures chiefly in­volve sus­pend­ing pay­ments into re­tire­ment funds.

“We now es­ti­mate that Trea­sury is likely to ex­haust its ex­tra­or­di­nary mea­sures on or about Thurs­day, Nov. 5,” Lew wrote to top law­mak­ers. “At that point, we would be left to fund the gov­ern- ment with only the cash we have on hand, which we cur­rently forecast to be be­low US$30 bil­lion.”

Congress last in­creased the debt limit in Fe­bru­ary 2014.

In 2011, the op­po­si­tion Repub­li­can Party used the need to in­crease the debt limit as lever­age to force U.S. Pres­i­dent Barack Obama to agree to spend­ing cuts. But Obama has since re­fused to ne­go­ti­ate over the debt limit and last year’s in­crease passed largely on the votes of law­mak­ers from his Demo­cratic Party.

The debt limit is­sue is but one el­e­ment in a dif­fi­cult ma­trix of is­sues fac­ing Congress this fall. While Repub­li­cans con­trol­ling both houses of Congress man­aged Wed­nes­day to avert a shut­down by fund­ing the gov­ern­ment through Dec. 11, dif­fi­cult ne­go­ti­a­tions over in­creas­ing the spend­ing caps set in 2011 — as de­manded by Obama — have only started.

Last week’s shock­ing an­nounce­ment by Boehner that he is step­ping down at the end of the month only com­pli­cates mat­ters. So too do an on­go­ing set of lead­er­ship races to re­place him and speak­erin-wait­ing Kevin McCarthy. Boehner is leav­ing un­der pres­sure from con­ser­va­tive law­mak­ers un­happy that he wasn’t us­ing a must-do tem­po­rary fund­ing bill to “de­fund” Planned Par­ent­hood.

The threat of a debt de­fault is far more dan­ger­ous than a par­tial gov­ern­ment shut­down and top Repub­li­cans such as up­per house Ma­jor­ity Leader Mitch McCon­nell have promised it won’t hap­pen. McCon­nell re­luc­tantly voted to in­crease the limit last year and will now have to re­cruit more Repub­li­cans to join him since there are fewer Se­nate Democrats af­ter last year’s midterm elec­tion.

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