Debt Ceiling

Is Boehner's Debt Limit Threat All Hot Air?

Brian Beutler | May 15, 2012, 4:00PM

Office of Management and Budget Director Jacob J. Lew, and Treasury Secretary Timothy Geithner

House Speaker John Boehner (R-OH) wants to add a plot twist to the post-election lame-duck session of Congress that will be deliberating how to avoid automatic spending cuts and tax increases set to take effect in January 2013. The twist? He wants to use the debt limit as leverage to make sure tax increases aren't part of the equation. His message today to the White House: If you want my cooperation on raising the debt limit, don't even think about raising taxes.

But for Boehner's threat to be feasible, the government would have to run out of borrowing authority in November or December. That seems unlikely.

Treasury officials note -- and Secretary Timothy Geithner made clear Tuesday -- that the administration expects to be able to manage its accounts in such a way that the true deadline for raising the debt limit won't actually come until early next year -- after the fiscal cliff on January 1, and possibly after the new Congress is sworn in. Which means it's unclear if Boehner's threat has any teeth to it.

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Debt Ceiling

Uh-Oh... Looks Like We'll Hit The Debt Limit Again This Year

Brian Beutler | January 31, 2012, 1:09PM

President Barack Obama

President Obama sacrificed an awful lot last year to take the debt limit off the legislative table until his second term, or some lucky Republican's first term. More importantly, he wanted it off the table until after the 2012 elections, to prevent a replay of last year's debt limit fight from playing out in the middle of election season, when the political consequences would be farther-reaching. And by "farther-reaching" we mean the doomsday scenario of legislators succumbing to a collective action problem and allowing the country to default on its debt.

Well, it looks like Obama will probably get his wish, but it will be an awfully close call.

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Debt Ceiling

White House Avoids Fight With GOP Over Debt Limit Hike

Brian Beutler | December 30, 2011, 1:28PM

President Barack Obama

Remember how the Obama administration planned to alert Congress of its intent to raise the debt limit by today? Well, that's getting kicked back a few days.

An aide to House Majority Leader Eric Cantor (R-VA) says the White House has assured Republicans they will not issue the debt limit request this week, heading off a confrontation between the administration and the GOP over Congress' power under the debt limit law to block the increased borrowing authority.

Under the terms of the August debt limit agreement, the administration was given the right to raise the debt limit by $2.1 trillion in three tranches, nearly unilaterally. The catch was that Republicans reserved the right for the House and Senate, within a narrow time frame, to block the increase. This caveat was largely symbolic. Democrats control the Senate and wouldn't undermine President Obama by triggering another debt limit crisis -- and even if they did, Obama would reserve the right to veto the so-called "resolution of disapproval." But it's a ready-made talking point for the GOP.

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Barack Obama

Just The Facts: Republicans Falsely Claim Obama Seeks Biggest Tax Hike In History

Brian Beutler | September 29, 2011, 11:19AM

President Barack Obama

After President Obama unveiled his jobs and deficit reduction plans, he took to the road to draw a contrast between himself and the Republican politicians who want to end his political career. Obama's proposes to spend money now on hiring people and cutting taxes temporarily to spur further job growth, and pay for it in just over a year, in large part by raising taxes on wealthy Americans.

The Republican vision -- phasing out safety net programs like Medicare in order to maintain low tax rates on the same group of affluent people -- is far less popular. So in their own tried and true way, Republicans recast Obama's plan for "shared sacrifice" as "the largest tax increase in history."

What a difference! But also untrue.

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Timothy Geithner

Geithner: Suskind Book Has No Basis In Reality

Susan Crabtree | September 19, 2011, 12:56PM

Office of Management and Budget Director Jacob J. Lew, and Treasury Secretary Timothy Geithner

Treasury Secretary Tim Geithner strongly rejected the way he is depicted in "Confidence Men," Ron Suskind's new book on the Obama administration's economic policies and efforts to shore up the financial sector in the wake of the collapse.

"I haven't read this book, but -- to borrow a phrase -- I've lived the reality," Geithner told reporters at a White House press briefing Monday. "Reports about this book bear no resemblance to the reality we lived."

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Jobs

How Obama's Jobs Plan Could Trigger Another Debt Limit Fight Before Election Day

Brian Beutler | September 19, 2011, 6:15AM

President Barack Obama and Treasury Secretary Timothy Geithner

If President Obama manages to get his entire jobs plan passed -- a big if, of course -- it will quicken the pace at which the federal government is burning through its new borrowing authority and could set up another debt limit battle with Republicans before Election Day 2012.

There are several variables at play, and another debt limit fight before the election wouldn't be a sure thing. But it's not out of the question, especially if economic growth between now and then is weaker than predicted.

A slower-than-expected economy -- or a double dip recession -- combined with the jobs bill's $447 billion price tag, means the federal government could run out of borrowing authority right about October 2012, according to one worst-case-scenario estimate. The deal to raise the debt limit last month was designed to give the government enough cushion to make it past the election before the parties would have to square off again. But that was before Obama introduced his new jobs plan, and before revised economic forecasts revealed the economy's in worse shape than economists believed earlier this year.

Here are the variables to watch that could come together to create an exquisitely timed political crisis:

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Treasury

CHART OF THE DAY: S&P's $2 Trillion Error Explained

Brian Beutler | August 8, 2011, 12:20PM

President Barack Obama and Treasury Secretary Timothy Geithner

In the weeks leading up to last week's debt limit deal, the ratings agency Standard & Poors warned that they would downgrade the country's AAA bond rating if the White House and Congressional leaders couldn't reach a fiscal consolidation plan of at least $4 trillion over 10 years.

The Congressional Budget Office scored the deal they ultimately reached at just over $2 trillion and S&P, perhaps feeling locked into its threat, made good on it.

The implication, to borrow from the Vice President, is that $2 trillion worth of deficit spending over ten years is a BFD.

But as Treasury Department officials, including Secretary Tim Geithner, have been angrily pointing out since Friday night, S&P's original analytical justification for the downgrade included a $2 trillion error, exaggerating U.S. deficits over the same 10 year window.

Geithner himself said, "[t]hey've shown a stunning lack of knowledge about basic U.S. fiscal budget math. And I think they drew exactly the wrong conclusion from this budget agreement."

Most reports have simply alluded to the error without explaining it. But here, according to Treasury officials, is what actually happened.

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Debt Ceiling

Chart Of The Day: Treasury's Quickly Draining Coffers

Kyle Leighton | July 27, 2011, 11:03AM

The chart below shows the operating balance for the U.S. Treasury, i.e. the "cash and debt operations" the federal government has, based on data from the Financial Management Service up until July 25th, and estimates from the Bipartisan Policy Center (BPC) to August 15th.

As you can see, there is a severe drop-off directly before and after August 2nd, when our national bank account goes into the red, seeming to confirm what Treasury Secretary Timothy Geithner has been saying for weeks. There has been some back-and-forth on what exactly the August 2nd deadline means, but according to the projections, the government will only have $12 billion in incoming revenue on August 3rd, and $32 billion in commitments.

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Debt ceiling

GOP Demand Obama Protect Social Security, Cut Something Or Other

Benjy Sarlin | July 26, 2011, 2:43PM

Sen. Pat Toomey (R-PA)

Republican lawmakers from the House and Senate gathered on Tuesday to repeat demands that the Treasury Dept shield seniors, soldiers, and bondholders from any ill effects of a default crisis. They've created legislation to this effect as well, which they urged the White House to back. Once again, however, the top sponsors of the measure are silent on what should be cut back instead.

Sen. Pat Toomey (R-PA) was asked repeatedly by reporters what payments Treasury Department should suspend to make up for the guarantees to Social Security and troop pay. He offered no specifics.

"There's room for other payments to be made," he said. "It is not our intent to specify every last dollar, but rather to identify these vitally important programs and avoid default on our debt."

The Treasury Department has said that Social Security payments may be suspended to deal with a default crisis if the debt ceiling is not raised by August 2. While Social Security, troop pay, and interest payments would not take up all the revenue projected to come into the Treasury on their own, the Bipartisan Policy Center (which Toomey cited in his press conference as well) has warned that the process will be so "chaotic" that "handling all payments for important and popular programs (e.g., Social Security, Medicare, Medicaid, defense, active duty pay) will quickly become impossible."

Debt Ceiling

Geithner On Debt Limit: 'No Way To Give Congress More Time To Solve This Problem'

Brian Beutler | July 14, 2011, 2:45PM

Treasury Secretary Timothy Geithner

Treasury Secretary Timothy Geithner says the time is all but up, and Congress must raise the debt limit by August 2, or unleash financial hell.

"There is no way to give Congress more time to solve this problem," Geithner told reporters in brief remarks outside the Senate chamber after meeting with the Democratic caucus.

"We're a country that meets its obligations, we're a country that pays our bills, and that we will act and do what's necessary to make sure that we can maintain that commitment," he added.

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14th Amendment

Pelosi On Obama Ignoring The Debt Limit: Ain't Gonna Happen

Brian Beutler | July 8, 2011, 2:27PM

House Minority Leader Nancy Pelosi (D-CA)

House Minority Leader Nancy Pelosi dumped the last shovel-full of dirt on the idea that President Obama can ignore the national borrowing limit if Congress refuses to raise it.

At her weekly press conference on Capitol Hill, she gave reporters a glimpse into a Thursday meeting at the White House with Democratic and Republican leaders, which, she said, became dominated by the question of the Constitutionality of the debt ceiling.

"At our meeting they spent a whole lot of time talking about the 14th Amendment. I said, 'you know what? Why are we talking about something that's not going to happen.'"

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Debt

Pick Up The Pace! White House Says Congress Needs Debt Deal By July 22

Brian Beutler | July 1, 2011, 9:46AM

President Barack Obama and Treasury Secretary Timothy Geithner

For all the talk about August 2 being the hard-and-fast deadline for Congress to raise the debt limit, that's never really been the case. The Treasury department considers August 2 the day they're likely to run out of headroom and either take drastic action to avoid a credit default, or begin missing interest payments and unleashing hell. It's like the outer bound. But practically, White House officials now say, that means Congress needs to have a debt limit deal in hand about two weeks before then -- a legislative lifetime -- if they're going to have enough time to crank out a bill and raise the debt limit in time to prevent calamity.

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Debt Ceiling

Eric Cantor: OK, Maybe The Debt Ceiling Deadline Is For Real

Benjy Sarlin | June 6, 2011, 11:49AM

House Majority Leader Eric Cantor (R-VA)

Backing off his earlier stance, House Majority Leader Eric Cantor (R-VA) is warning colleagues that the Treasury Department's deadline to raise the debt ceiling before a catastrophic default is the real deal.

"Secretary Geithner feels August 2 is his deadline," Cantor told ABC News in an interview released on Monday. "I don't question the Secretary of the Treasury other than to say we're trying to get in place real spending reductions -- trillions of dollars of spending reductions -- if the president wants us to increase the credit limit of this country by trillions of dollars."

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Debt Ceiling

First Debt Limit Vote Today As GOP Looks To Divide Dems

Benjy Sarlin | May 31, 2011, 10:20AM

House Speaker John Boehner (R-OH), House Majority Leader Eric Cantor (R-VA), and other members of the GOP leadership

Congress will holds its first vote on the debt ceiling on Tuesday, with the GOP House majority bringing up a "clean" bill that would raise the limit on the government's borrowing ability with no strings attached, i.e., no spending cuts. That's exactly what most Democrats have been calling for, so why would Republicans give them a chance to vote on it? That's where this gets tricky.

The vote is intended to expose fault lines within the Democratic caucus, with Republicans counting on sizable number of Democrats to side with them and bolster their case that Democrats need to agree to deep spending cuts as a condition to raising the debt limit.

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Debt Ceiling

How Republicans Are Convincing Themselves That A Debt Default Wouldn't Be So Bad -- And Why They're Wrong

Brian Beutler | May 20, 2011, 1:53PM

House Speaker John Boehner (R-OH) with Senate Minority Leader Mitch McConnell (R-KY)

Congressional Republicans are falling under the spell of an unorthodox group of financial experts who dispute the views of their peers and say that the U.S. could default briefly on debt payments without major, lasting consequences to the U.S. economy and international markets.

The most influential of these dissidents is Stanley Druckenmiller, a billionaire former-hedge fund manager who helped George Soros build his fortune. His recent comments to the Wall Street Journal have carried the day with senior Republicans like House Budget Committee Chairman Paul Ryan (WI), House Majority Leader Eric Cantor (VA), and Sen. Pat Toomey (PA), all of whom now say the U.S. could weather three or four days of missed interest payments, as long as the U.S. debt ceiling were quickly lifted, and a credible debt reduction plan signed into law.

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Government Shutdown

Top Treasury Official: Government Shutdown May Be Unavoidable

Brian Beutler | March 11, 2011, 10:11AM

President Barack Obama

A senior Treasury department official told reporters Thursday that a brief government shutdown may be unavoidable as the only feasible way to de-escalate the confrontation over government spending dividing Democrats and Republicans on Capitol Hill. The official said the administration still hopes to avoid such a flashpoint because of the impact it would have on the economy, but added that President Obama will not sign short-term stop-gap government funding measures in perpetuity.

The comments were made in a briefing with reporters conducted on deep background, meaning no direct quotes could be attributed to the official.

The official's remarks represent the most serious indication yet that the administration is willing to endure a short term shutdown despite the unknown political costs, to focus congressional leadership on brokering a long-term deal. But they also come at a time of ongoing negotiations between the White House and congressional Republicans, and are a signal that the administration isn't resigned to getting rolled by the GOP. Whether that's tough talk designed to move negotiations, a bluff, or an indication that the White House is prepared to go the brink on this remains to be seen.

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Bush Tax Cuts

Obama Again Demands GOP Stop Holding Middle Class Tax Cuts Hostage

Brian Beutler | September 17, 2010, 2:14PM

President Barack Obama

In a Rose Garden address this afternoon appointing Elizabeth Warren to be a consumer watchdog for the Treasury Department, President Obama again insisted that Republicans allow a vote on middle-income tax cuts.

"We know that a strong middle class leads a strong economy," Obama said. "And that's why as we dig our way out of this recession we've set our sights on policies that grow the middle class and provide a ladder for those who are struggling to join it. And that's why I am urging the leaders of the other party to stop holding middle class tax cuts hostage and extend this relief to families immediately."

Obama's been hitting the same note for more than a week now. Unfortunately for him, House Democrats aren't making his job, or the politics of this fight, very easy.