Tag: Debt Limit

What Happens Now (With Congress)?

 

Russian revolutionary Vladimir Lenin famously said, “There are decades where nothing happens, and there are weeks where decades happen.” They often qualify as fulfilling the ancient Chinese curse, “May you live in interesting times.”

We’re about to learn whether one or both fits the present. In the meantime, much drama awaits as the 118th Congress, probably the most narrowly divided Congress in American history, begins on January 3rd.

Member Post

 

It should have been no surprise that Senate GOP leader Mitch McConnell expertly timed a proposal late Wednesday – after the “markets” closed, and more about that later – to go along with a temporary, conditional “deal” to extend our government’s debt limit until December, including a “price tag” just south of $500 billion. Senate […]

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Member Post

 

I’m waiting for a sane Democrat (oxymoron alert) to say that it’s “darkest before dawn.” It would at least add a little levity to the negotiations that resemble more a locker room brawl that is spilling out onto the field for everyone to see. Nancy Pelosi broke her promise to vote Thursday on a bipartisan […]

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Pathway to a Balanced Budget Begins with a Fixed Debt Limit that Provides Flexibility

 

According to the Bipartisan Budget Act of 2015 (Public Law 114-74), the current suspension of the debt ceiling expires at the end of the day Wednesday, March 15. Following this date, the US Treasury can avoid defaulting on the federal debt only by using “extraordinary measures.” Indeed, Treasury Secretary Mnuchin sent a letter to Speaker Ryan on March 8, stating that the Treasury will start using these measures on March 16. He also asked Congress address the matter in a way that avoids jeopardizing the full faith and credit of the US government. These measures (i.e., accounting steps) will most likely allow the federal government to make it to early fall before it runs up against a hard ceiling on the debt.

Suspension or No Suspension?

The first question facing Congress on the debt ceiling is whether to set a new debt ceiling or simply to extend the current suspension. What should Congress do? Without hesitation, I recommend that Congress set a new ceiling that aligns with the state of the art balance budget amendment that is being proposed by the States.

Short of eliminating the debt ceiling permanently, extending the current suspension is the most fiscally irresponsible act Congress can possibly take. Fiscal conservatives must recognize, however, that extending the suspension is the easiest thing for Congress to do. It serves to kick the can down the road on fixing the budget. The big spenders will argue that only raising the debt ceiling will still lead to a government shutdown or default on the government’s debt. The use of these scare tactics will be designed to precipitate a fight in Congress the big spenders will use to put in place a policy of permanent deficits and unending increases in the debt. Fiscal conservatives must be prepared to fight back.