Congress Takes Up Debt Limit and FY 14 Budget

January 30, 2013

pic-capitol-roadOn Jan. 23, the House approved by a vote of 285-144, a Republican-sponsored bill that would suspend the federal debt ceiling through May 18 without requiring additional spending cuts and without setting a specific new ceiling on borrowing.

The No Budget, No Pay Act (H.R. 325) includes a provision that would withhold pay for members of either chamber of Congress if that chamber does not approve a fiscal year 2014 budget resolution by April 15. The House and Senate are expected to have their respective budget resolutions in place by the required date; however, those resolutions are likely to be substantially different, and the challenges of producing a budget that both chambers can agree to will likely prove quite difficult.

The Senate is expected to take up the legislation and pass it, although a vote has yet to be scheduled. Additionally, the White House expressed its support for a long-term extension of the debt ceiling but indicated that it would not oppose the House-passed measure.

As of Dec. 31, 2012, the U.S. reached the current debt limit of nearly $16.4 trillion, and the Treasury Department has been using “extraordinary measures” to avoid exceeding the debt limit.  According to Treasury, it is expected that the government’s ability to meet its current obligations will be exhausted between mid-February and early March of this year.

Meanwhile, the Senate Democratic leaders confirmed that they will move a fiscal year 2014 budget resolution through the Senate Budget Committee, Chaired by Sen. Patty Murray (D-Wash.) and to the chamber floor that calls for increased revenue from closing certain tax provisions benefiting corporations and high-income individuals.

So far, leaders have not identified specific revenue-raising provisions that they would like to see included in an eventual tax bill, but Majority Whip Richard Durbin (D-Ill.) has expressed that the deficit should not be addressed through spending cuts alone and that the amount of revenue generated under the recent fiscal cliff compromise falls short of the levels recommended by the Simpson-Bowles Commission or the bipartisan Senate Gang of Six, in both of which Durbin participated.  A budget resolution that calls for revenue increases is likely to face stiff resistance from Senate Republicans, who have stated in the wake of the fiscal cliff agreement, that they will not consider additional tax hikes.

A revenue-raising budget plan is also unlikely to get a favorable reception from House Republicans, who continue to maintain that any increases in federal revenues should come from economic growth generated by tax reform. House Republicans have not yet revealed details of their upcoming budget resolution, although both Speaker John Boehner (R-Ohio), and Budget Committee Chairman Paul Ryan (R-Wis.), have said their plan will produce a balanced budget within 10 years.

So far, the White House has remained quiet on its budget proposal for the coming fiscal year, only citing that it will miss its Feb. 4 deadline for submitting a tax and spending plan to Congress but will complete a package as soon as possible.

This is not the only deadline Congress and the White House face, but other issues that may impact the fight over fiscal policy include: the mandatory “sequester” spending cuts under the Budget Control Act of 2011, which were originally scheduled to go into effect on Jan. 2, 2013 but were postponed until March 1 as part of the recently enacted fiscal cliff deal, as well as the continuing resolution that currently funds government operations which expires on March 27.

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