Fed­eral gov’t hits $14 tril­lion debt limit

The Washington Times Weekly - - Politics - BY STEPHEN DI­NAN

The fed­eral gov­ern­ment of­fi­cially bumped up against its bor­row­ing limit May 16, an un­happy mile­stone that sig­nals the be­gin­ning of a two-month sprint dur­ing which Congress and the White House will try to agree on whether to raise the debt ceil­ing while im­pos­ing spend­ing re­straints.

In the short term, hit­ting the debt limit means lit­tle - the Trea­sury Depart­ment has tools it can use to keep gov­ern­ment run­ning at full tilt through early Au­gust. But if the $14.294 tril­lion ceil­ing is not raised by then, the gov­ern­ment will have to stop pay­ing more than a third of its an­nual spend­ing, which could halt work­ers’ salaries, con­tracts, en­ti­tle­ment ben­e­fits, in­ter­est pay­ments or some com­bi­na­tion of those.

“We need to have a vote to lift the debt ceil­ing be­cause the con­se­quences of not do­ing so would be quite se­ri­ous, in­deed,” White House press sec­re­tary Jay Car­ney told re­porters trav­el­ing with Pres­i­dent Obama. “Those who sug­gest other­wise are whistling past the grave­yard.”

Even many Repub­li­cans say they want to raise the bor­row­ing limit, but there the agree­ment ends.

The White House has called for a “clean” in­crease. Of­fi­cials have said that they don’t want to spook the fi­nan­cial mar­kets by sug­gest­ing there are con­di­tions to rais­ing the ceil­ing. But Repub­li­cans have said that is im­pos­si­ble and ir­re­spon­si­ble be­cause it would al­low the gov­ern­ment to con­tinue pil­ing up record an­nual deficits.

The GOP’s lead­ers are in­sist­ing on bind­ing changes in the short term to dis­cre­tionary spend­ing, and in the long term to en­ti­tle­ment spend­ing.

“Amer­i­cans un­der­stand we sim­ply can’t keep spend­ing money we don’t have,” said House Speaker John A. Boehner, Ohio Repub­li­can. “There will be no debt limit in­crease with­out se­ri­ous bud­get re­forms and sig­nif­i­cant spend­ing cuts, cuts that are greater than any in­crease in the debt limit.”

Even the White House mixed its mes­sages. Spokes­men have in­sisted that con­di­tions won’t be at­tached, but Mr. Obama has said he ex­pects to have to agree to some GOP de­mands.

The pres­i­dent is also the vic­tim of his own record. He voted against rais­ing the debt ceil­ing while he was in the Se­nate. His ad­vis­ers have since said that was a mis­take.

Trea­sury Sec­re­tary Ti­mothy F. Gei­th­ner alerted Congress in a letter that the ceil­ing had been hit. He said he will tem­po­rar­ily stop pay­ing into some gov­ern­ment re­tire­ment funds, de­lay­ing the cross­ing of the statu­tory debt limit un­til Aug. 2.

Af­ter that, the gov­ern­ment will be able to spend only what it gets in rev­enue. Since the gov- ern­ment bor­rows about 40 cents of ev­ery dol­lar it spends, that would mean im­me­di­ately halt­ing about 40 per­cent of all spend­ing.

Mr. Gei­th­ner said it could have “cat­a­strophic eco­nomic con­se­quences for cit­i­zens” if Congress doesn’t act.

The stag­ger­ing to­tal dol­lar

The stag­ger­ing to­tal dol­lar amount of the debt is dif­fi­cult to grasp, so Rep. Jeff Flake, Ari­zona Repub­li­can and a long­time deficit hawk, reg­u­larly re­leases state­ments mea­sur­ing the size of the debt based on ev­ery­day items. Last month, he said that if Prince Wil­liam’s royal wed­ding to Kate Mid­dle­ton cost $49 mil­lion, the U.S. debt could fund 285,714 of them. On May 16, he said the debt could buy 2.86 tril­lion $5 bags of En­ten­mann’s Pop’ems dough­nut holes.

amount of the debt is dif­fi­cult to grasp, so Rep. Jeff Flake, Ari­zona Repub­li­can and a long­time deficit hawk, reg­u­larly re­leases state­ments mea­sur­ing the size of the debt based on ev­ery­day items.

Last month, he said that if Prince Wil­liam’s royal wed­ding to Kate Mid­dle­ton cost $49 mil­lion, the U.S. debt could fund 285,714 of them. On May 16, he said the debt could buy 2.86 tril­lion $5 bags of En­ten­mann’s Pop’ems dough­nut holes.

The last time the debt limit was raised was Feb. 12, 2010, when it in­creased by $2.19 tril­lion.

Democrats and Repub­li­cans have used par­lia­men­tary tech- niques to shield House lawmakers from hav­ing to vote on in­creas­ing the debt, but Mr. Boehner promised House Repub­li­cans that they would have a chance to have a spe­cific vote, and that de­ci­sion has given him more power and more re­spon­si­bil­ity in ne­go­ti­a­tions.

Much of the de­bate over spend­ing has cen­tered on how the U.S. got into this sit­u­a­tion.

Dur­ing the Clin­ton ad­min­is­tra­tion, the debt grew from $4.188 tril­lion to $5.728 tril­lion. The amount in­creased dra­mat­i­cally un­der the Bush ad­min­is­tra­tion, to $10.627 tril­lion. Since Mr. Obama be­came pres­i­dent, the amount of debt has hit $14.308 tril­lion. The to­tal is more than the debt limit be­cause not all debt is counted against the statu­tory ceil­ing.

A Con­gres­sional Bud­get Of­fice re­port two weeks ago looked at the shift in the gov­ern­ment’s fis­cal stance in 2001 ver­sus to­day and found that new spend­ing and a poor econ­omy were re­spon­si­ble for most of the de­te­ri­o­ra­tion, fol­lowed by Mr. Bush’s tax cuts and then Mr. Obama’s tax cuts.

Mr. Obama has con­vened a group of top-level lawmakers and Vice Pres­i­dent Joseph R. Biden and asked them to work on a deal to start bring­ing down deficits. Mr. Obama in­sists that tax in­creases should be part of the so­lu­tion, while Repub­li­cans have said en­ti­tle­ment cuts need to be con­sid­ered in­stead.

On May 16, House Mi­nor­ity Leader Nancy Pelosi told CNBC that Medi­care changes should be “on the ta­ble,” though she told Bloomberg that doesn’t mean agree­ing to House Repub­li­cans’ plan to con­vert the pro­gram into a voucher-style sys­tem.

The is­sue will con­tinue to roil the po­lit­i­cal de­bate for the next two months, but on May 16 a group rep­re­sent­ing fed­eral em­ploy­ees said the fact that their re­tire­ment funds are be­ing tapped to sup­ply the gov­ern­ment with cash punc­tures the be­lief by some that gov­ern­ment work­ers’ costs are over­whelm­ing the sys­tem.

“It is clear that fed­eral em­ployee re­tire­ment funds aren’t bank­rupt or bankrupt­ing Amer­ica. Rather, the funds are strong enough to save the nation from bank­ruptcy,” said Joseph A. Beau­doin, pres­i­dent of the Na­tional Ac­tive and Re­tired Fed­eral Em­ploy­ees As­so­ci­a­tion.

ASSOCIATED PRESS

Deeper and deeper: House Speaker John A. Boehner is among GOP lead­ers in­sist­ing on bind­ing changes in the short term to dis­cre­tionar y spend­ing, and in the long term to en­ti­tle­ment spend­ing.

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