The Treasury Department warned lawmakers on October 3 of the impending dangers to the U.S. economy caused by not raising the nation’s authority to borrow. The department released a report warning that a failure by lawmakers to raise the debt limit by October 17 might lead to a recession worse than in 2008, complete with frozen credit markets and a decline in the value of the U.S. dollar.
Treasury Secretary Jack Lew warned that the prolonged uncertainty caused by waiting until the very last minute to raise the debt limit would damage consumer and business confidence, stock prices and economic expansion. Failing to raise the debt ceiling will increase interest rates on mortgages, business loans and government borrowing. “Our nation has worked hard to recover from the 2008 financial crisis, and Congress must act now to lift the debt ceiling before that recovery is put in jeopardy,” Lew said in a written statement.
The Treasury report came just days after Lew sent a similar warning message directly to House Speaker John Boehner, R-Ohio. In an October 1 letter, Lew said the government reached its statutory borrowing limit in May and is just weeks away from exhausting all of its extraordinary measures to pay the government’s bills. “Today, I am writing to inform Congress that as of today Treasury has begun using the final extraordinary measures,” the letter reads. Once the temporary measures are exhausted, the Treasury will have approximately $30 billion to meet the nation’s financial commitments, which can run as high as $60 billion on some days, Lew said.
No Shutdown Solution
The current government shutdown, caused by Congress’s failure to pass a temporary, stop-gap funding measure known as a continuing resolution by October 1, could worsen the effects of not raising the debt limit, according to the Treasury report. Lawmakers have passed several versions of temporary funding bills, but neither Democrats nor Republicans have found a compromise for a final budget agreement. In the interim, House lawmakers worked on measures to pay the national guardsmen and open up national parks on October 3.
The House approved the Pay Our Guard and Reserve Bill (HR 3230) and Honoring Our Promise to America’s Veterans (HJRes 72), but the Senate appeared unlikely to approve of the measures designed to relieve some of the effects of the government shutdown. Senate Democrats said they do not support a piecemeal approach to reopening the federal government and would prefer the House to pass a funding bill that does not include changes to the Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148).
At least one bipartisan effort to end the standoff over government funding centers around repealing a tax provision in the PPACA. Reps. Ron Kind, D-Wis., and Charles Dent, R-Pa., sent a letter to Boehner and House Minority Leader Nancy Pelosi, D-Calif., suggesting ending the stalemate with a six-month extension of the federal budget at an annualized rate of $986 billion.
The lawmakers also suggested that the PPACA’s $30-billion medical device tax be repealed, and the missing revenue be replaced by extending a pension stabilization provision included in a transportation authorization bill that passed the Senate in June 2012. “It is time that we break this impasse. We are ready to work together to move forward on these important issues,” the bipartisan letter reads.
By Stephen K. Cooper, CCH News Staff