The debt ceiling is back.
Just 16 months ago, a fight over the national borrowing limit paralyzed Washington, damaged the country’s credit rating and nearly pitched the United States into default.
House Minority Leader Nancy Pelosi (D-Calif.) today said Republicans "took a hike" on budget negotiations last summer, but added they "can hike on back" to pass the president's proposal for averting the so-called "fiscal cliff."
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Want to abolish the debt ceiling? Join the club.
The list of people who want to eliminate the debt ceiling includes Alan Greenspan, three former Treasury Secretaries, most of the nation's prominent economists, and analysts dating as far back as the 1950s.
On Thursday, the White House and Democrats in Congress signaled that they wanted to take up that fight up again — and do it now.
They warned Republicans that any solution to this year’s “fiscal cliff” standoff must also address the nation’s need to again raise the debt ceiling to avoid default.
“Whatever arrangement we come up with, there will be an agreement on the debt ceiling,” Senate Majority Leader Harry M. Reid (D-Nev.) told reporters Thursday, saying he was echoing a statement from President Obama. “Or there will be no agreement.”
In a meeting Thursday with House Speaker John A. Boehner, Republican aides said Treasury Secretary Timothy F. Geithner proposed that Congress give Obama greater control over raising the debt ceiling.
He asked that Congress agree that the president be allowed to propose a debt-ceiling increase, which Congress can vote to disapprove. But Obama could then force an increase in the debt ceiling by vetoing the resolution of disapproval.
Republicans balked at that suggestion. House Speaker John A. Boehner (Ohio), the most powerful Republican in Congress, has appeared open to congressional action to raise the debt ceiling, but he has laid out some tough terms in exchange for doing so, either now or after Jan 1.
For each dollar the limit goes up, Boehner has demanded that the government cut a dollar in spending.
For the leadership of both parties, there could be advantages to dealing with this issue now, as part of a larger agreement to avoid the “cliff” of large tax hikes and spending cuts scheduled to take effect Jan. 1.
For Democrats, it would mean preventing another, separate debt-ceiling showdown next year. Such a scenario could damage the economy and also highlight the fast-rising debt accumulating on Obama’s watch.
For Republican leaders, it would avoid another crisis like the last one — in which some conservative members pondered allowing the nation to default as a kind of tough-love lesson.
Either way, neither party can put off this fight much longer. The country is already running out of room to borrow.
After the battle in the summer of 2011, Congress raised the national debt limit to $16.394 trillion. This week, a study by the nonprofit Bipartisan Policy Center concluded that, given the current pace of borrowing, the Treasury Department will hit that limit sometime in late December.
Treasury officials could give themselves more time, the center concluded, with a series of extraordinary legal and financial maneuvers. The Treasury Department has said those steps would push the limit to “early in 2013.” The Bipartisan Policy Center narrowed it down a little more: The money would last until sometime in February.
Then comes “X Date” — the time when the United States simply runs out of money to pay its bills. That could be just weeks after a new Congress is sworn in and just days after Obama takes his second oath of office.
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