Deadline for Debt Limit Increase: July 22July 5, 2011
Although, the Treasury Department has stuck with their Aug. 2 deadline for Congress to approve new borrowing and avoid a default on a budget deal, the White House wants Congressional legislation to increase the debt limit to be introduced no later than July 22.
Taking into account the congressional calendar, and given the overlapping recesses and the time needed to make a bill publicly available prior to votes, the administration is now stating that Congress must move substantially before Aug. 2 to ensure it can finish, and pass legislation by the Treasury deadline.
Recently, Treasury Secretary Timothy Geithner warned of huge risks if Congress fails to raise the $14.3 trillion debt ceiling by August 2, potentially triggering a default that could send shivers through an already-fragile banking system.
While the actual legislative vehicle or vehicles have yet to be determined, it is expected that an increase in the debt ceiling will be accompanied by a larger package of deficit-reduction measures.
After Republicans opted not to attend a budget negotiation meeting led by Vice President Joe Biden last week, President Barack Obama took on a bigger role and is now personally negotiating this package. However, talks have hit an impasse yet again over the issue of revenues. The president has said the package must be “balanced,” and include cuts in discretionary spending, entitlements, as well as revenue increases through the tax code. Republicans have called any tax hikes a non-starter and have argued that they would dampen an already sputtering economic recovery. On the other side of the aisle, Democrats do not want to see cuts to the Medicare healthcare plan for the elderly.
In response to Obama urging lawmakers to stay in town and work on a deal, Senate Democratic Leader Harry Reid (D-Nev.) canceled the planned July 4 week-long recess. The House also will cancel its planned break the week of July 18, if necessary.
Now that both parties have remained in town, Obama and Biden are likely to invite congressional leaders of both parties to the White House to discuss raising the debt ceiling rather than meeting only with Congressional Democrats. However, the meeting, or meetings, will be mostly symbolic because it has already been speculated that Senate Democrats may vote as early as Wednesday on a nonbinding “sense of the Senate” resolution that says people who earn $1 million a year or more each year should “make a more meaningful contribution to the deficit reduction effort.”
Additionally, some Senate Democrats are weighing other options including a scaled-back budget deal that would avert a looming default but force Congress to tackle the politically toxic issue again before the 2012 elections. But a short-term deal, which is not popular with credit rating agencies, could further divide Republicans who continue to disagree over the proposal.