MacIver News Service | May 16, 2011
According to projections by the U.S. Department of Treasury the federal government has reached the debt limit, although it impossible to say that with absolute certainty given the constant in and out flow of cash.
Debate over raising the nation’s debt ceiling will now take center stage in Washington, something one leading Republican is looking forward to.
“They used to put the debt limit increase in the budget whenever it passed,” said Congressman Paul Ryan (R-WI 01), Chair of the House Budget Committee. “They snuck it under the rug so people never saw it happening. We thought that was wrong,”
Once the debt ceiling is recognized, the government cannot borrow any more money, a practice it depends on to pay its legal obligations. This is different from the government shutdown debate, which involved the government’s ability to spend more money.
The Treasury Department will now resort to “extraordinary” measures to buy Congress time to act. It believes it can continue paying the government’s bills until August 2, after which time it would begin defaulting on its legal obligations.
The Treasury Department stresses these obligations do not constitute new spending. It is previously approved spending, like Social Security, Medicare, military salaries, interest on the national debt, tax refunds, etc. If the government fails to continue paying for those obligations, it would cause investors around the world to question the United States’ ability to meet its commitments.
“The ensuing financial crisis from a default would have catastrophic economic consequences, potentially including the loss of millions of American jobs,” according to a press release from the Treasury Department. “And it would lead to higher borrowing costs, reduced retirement savings, and lower home values for families across the nation.”
Congress has raised the ceiling 74 times in the last 50 years. Raising the debt ceiling had traditionally been done quietly under the so-called Gebhardt Rule. The current debt ceiling, last raised in February 2010, is at $14.29 trillion.
“We repealed the Gephardt Rule, so Congress has to vote individually, unilaterally on whether to raise the debt limit or not,” said Ryan in an interview with MacIver News. “And this brings attention to this issue of debt, which is what we were seeking to do in the first place.”
That has sparked an intense a debate on whether or not to raise the debt ceiling. There is little doubt Congress will eventually agree to raising the limit. However, in the meantime, Republicans are demanding a dollar-for-dollar match in spending cuts. Ryan said Republicans want to stop the skyrocketing federal spending that results in such a rapid increase in the national debt.
Ryan said he appreciates those who question the purpose of having a debt ceiling in the first place if it is simply raised every time we approach it.
“That’s why we want to change it this time,” said Ryan. “We think this time is different. We think we need to get real spending cuts, real spending controls in place to deal with the future debt.”
MacIver News‘ Bill Osmulski reports: