A $50 billion increase in the federal debt limit for this fiscal year was approved by unanimous voice vote in the House Ways and Means Committee yesterday.
The full House is scheduled to vote on the approved increase tomorrow, and the Senate Finance Committee plans to consider the debt ceiling rise today.
Both Treasury Secretary Donald T. Regan and Director of the Office of Management and Budget David A. Stockman urged the Ways and Means Committee to raise the limit to $985 billion from $935 billion, despite the administration's avowed aim of cutting federal borrowing.
The need to raise the ceiling was "really an item of old business," said Stockman, who consistently has voted against increases in the debt limit in the past. It is needed urgently to enable the government to go on raising money to pay bills already run up by Congress and the previous administration, Regan told the panel.
The Treasury secretary said Congress should approve the higher ceiling before it leaves at the end of the week for the Washington's Birthday recess to avoid confusion in financial markets. Otherwise, the government will run up against the current ceiling some time in the middle of next week, Regan said.
Neither he nor Stockman would give details of the assumptions about tax and spending policies which underlie the administration's request for a higher debt limit. President Reagan is to announce his new economic policy in about two weeks.
But they did indicate that the limit they have chosen would be compatible with the previous administration's policies. It is $5 billion less than would have been prudent under unchanged policies, they said, but added that $3 billion or $4 billion in additional revenues now can be expected from "windfall profits" taxes as a result of Reagan's early lifting of oil price controls.
The administration has assumed that both taxes and spending will be cut in this fiscal year, which ends in September, Regan said, and that there will be some "reflow" of tax revenue back to the government during the fiscal year as a result of higher economic activity after the tax cuts.
The Treasury secretary admitted under questioning that the debt limit almost certainly would have to be raised again after September to cover a budget deficit in fiscal 1982. Regan also said that, unless the procedure for setting the limit is changed, he probably will be back before the committee later this year asking for a raise in the limit past the $1 trillion mark.
Stockman likened the federal government's position to that of the troubled Chrysler company. He said the national debt is so high and the cost of debt service so great that "we're in the early stages of the very same insolvency crisis as that company experienced on a smaller stage."
But the administration is committed to getting a grip on the "ballooning" federal borrowing, he and Regan said. Congress would be asked to make deep cuts in spending across the board once Reagan sends his policy to the Hill. Stockman added that the precise savings made in the present fiscal year would depend largely on when Congress approves spending and tax cuts.
For example, the administration will ask for an end to the national trigger for increased unemployment benefits, Stockman said. If this is passed by May, there could be substantial savings, whereas if it's passed only by July there will be very little saved in 1981, he asserted.
The OMB director also said the administration may ask for more defense spending in real terms, even though the Pentagon also would be scrutinized for waste and extravagance. "That will not stop us from asking for more real dollars" to build up our defenses, he said.
Rep. Thomas Downey (D-N.Y.) called Stockman's program the "ultimate Scarsdale diet" and added he hoped he did not share the same fate as the "diet doctor" who was shot last year by his mistress.
Regan criticized the Treasury's own figures for being "very soft" and said that the federal government was "constantly in danger of default on our checks." Regan was critical last week also of the economists in the Treasury Department for their "soft" forecasts. Yesterday he pledged himself to develop a "great deal more precision."
He also said he sees no reason not to integrate the on- and off-budget expenditures and intends to cut off-budget spending and borrowing considerably. e