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$14 trillion-plus debt weighs on Congress
TOM RAUM, Associated Press Sat Jan 15, 6:15 pm ET
WASHINGTON The United States just passed a dubious milestone: Government
debt surged to an all-time high, topping $14 trillion $45,300
for each and everyone in the country.
That means Congress soon will have to lift the legal debt limit to give
the nearly maxed-out government an even higher credit limit or dramatically
cut spending to stay within the current cap. Either way, a fight is ahead
on Capitol Hill, inflamed by the passions of tea party activists and deficit
Already, both sides are blaming each other for an approaching economic
train wreck as Washington wrestles over how to keep the government in
business and avoid default on global financial obligations.
Bills increasing the debt limit are among the most unpopular to come before
Congress, serving as pawns for decades in high-stakes bargaining games.
Every time until now, the ending has been the same: We go to the brink
before raising the ceiling.
All bets may be off, however, in this charged political environment, despite
some signs the partisan rhetoric is softening after the Arizona shootings.
Treasury Secretary Timothy Geithner says failure to increase borrowing
authority would be "a catastrophe," perhaps rivaling the financial
meltdown of 2008-2009.
Congressional Republicans, flexing muscle after November's victories,
say the election results show that people are weary of big government
and deficit spending, and that it's time to draw the line against more
Defeating a new debt limit increase has become a priority for the tea
party movement and other small-government conservatives.
So far, the new GOP majority has proved accommodating. Republicans are
moving to make good on their promise to cut $100 billion from domestic
spending this year. They adopted a rules change by House Speaker John
Boehner that should make it easier to block a debt-limit increase.
The national debt is the accumulation of years of deficit spending going
back to the days of George Washington. The debt usually advances in times
of war and retreats in peace.
Remarkably, nearly half of today's national debt
was run up in just the past six years. It soared from $7.6 trillion in
January 2005 as President George W. Bush began his second term to $10.6
trillion the day Obama was inaugurated and to $14.02 trillion
now. The period has seen two major wars and the deepest economic downturn
since the 1930s.
With a $1.7 trillion deficit in budget year 2010 alone, and
the government on track to spend $1.3 trillion more this year than it
takes in, annual budget deficits are adding roughly $4 billion
a day to the national debt. Put another way,
the government is borrowing 41 cents for every dollar it spends.
In a letter to Congress, Geithner said the current statutory debt ceiling
of $14.3 trillion, set just last year, may be reached by the end of March
and hit no later than May 16. He warned that holding it hostage
to skirmishes over spending could lead the country to default on its obligations,
"an event that has no precedent in American
Debt-level brinkmanship doesn't wear a party label.
Here's what then-Sen. Barack Obama said on the
Senate floor in 2006: "The fact that we are here today
to debate raising America's debt limit is a sign of leadership failure.
It is a sign that the U.S. government can't pay its own bills. It
is a sign that we now depend on ongoing financial assistance from foreign
countries to finance the government's reckless fiscal policies."
It was a blast by the freshman lawmaker against a Bush request to raise
the debt limit to $8.96 trillion.
Bush won on a 52-48 party-line vote. Not a single Senate Democrat voted
to raise the limit, opposition that's now complicating White House efforts
to rally bipartisan support for a higher ceiling.
Democrats have used doomsday rhetoric about a looming government shutdown
and comparing the U.S. plight to financial crises in Greece and Portugal.
It's all a bit of a stretch.
"We can't do as the Gingrich crowd did a few years ago, close the
government," said Senate Majority Leader Harry Reid, D-Nev., referring
to government shutdowns in 1995 when Georgia Republican Newt Gingrich
was House speaker.
But those shutdowns had nothing to do with the debt limit. They were caused
by failure of Congress to appropriate funds to keep federal agencies running.
And there are many temporary ways around the debt limit.
Hitting it does not automatically mean a default on existing debt. It
only stops the government from new borrowing, forcing it to rely on other
ways to finance its activities.
In a 1995 debt-limit crisis, Treasury Secretary Robert Rubin borrowed
$60 billion from federal pension funds to keep the government going. It
wasn't popular, but it helped get the job done. A
decade earlier, James Baker, President Ronald Reagan's treasury secretary,
delayed payments to the Civil Service and Social Security trust funds
and used other bookkeeping tricks to keep money in the federal till.
Baker and Rubin "found money in pockets no one knew existed before,"
said former congressional budget analyst Stanley Collender.
Collender, author of "Guide to the Federal Budget," cites a
slew of other things the government can do to delay a crisis. They
include leasing out government-owned properties, "the federal equivalent
of renting out a room in your home," or slowing down payments to
Now partner-director of Qorvis Communications, a Washington consulting
firm, Collender said such stopgap measures buy the White House time to
resist GOP pressure for concessions.
"My guess is they can go months after the debt ceiling is not raised
and still be able to come up with the cash they need. But at some point,
it will catch up," and raising the debt limit will become an imperative,
Republican leaders seem to acknowledge as much, but first want to force
big concessions. "Do I want to see this nation default? No. But I
want to make sure we get substantial spending cuts and controls in exchange
for raising the debt ceiling," said the chairman of the House Budget
Committee, Rep. Paul Ryan, R-Wis.
Clearly, the tea party types in Congress will be given an up-and-down
vote on raising the debt limit before any final deal is struck, even if
the measure ultimately passes.
"At some point you run out of accounting
gimmicks and resources. Eventually the government is going to have to
start shutting down certain operations," said Mark Zandi,
chief economist for Moody's Analytics.
"If we get into a heated, protracted debate over the debt ceiling,
global investors are going to grow nervous, and start driving up interest
rates. It will all become negatively self-re-enforcing," said Zandi.
"No good will come of it."
The overall national debt rose above $14 trillion
for the first time the last week in December. The part subject
to the debt limit stood at $13.95 trillion on Friday and was expected
to break above $14 trillion within days.
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