The Washington Post

The GOP’s strange debt ceiling bill

On the surface, the proposal seems like a (temporary) capitulation in the debt-ceiling stand-off: House Republicans will vote tomorrow to raise the debt ceiling for three months, on the condition that the Senate passes a budget that will presumably include significant deficit reduction.

(Manuel Balce Ceneta/Associated Press)

But the nitty-gritty of the bill reveals that it's more complicated than that: The way the bill is written, Republicans won't technically be voting to raise the borrowing limit by a set amount, as Congress typically has done. Rather, "the bill would suspend the section of the law that mandates a limit on government borrowing" before May 19, explains George Washington University professor Sarah Binder, a congressional procedure expert. Then, on May 19, "the debt limit would automatically be increased to account for the borrowing that occurred during that period."

The rationale for suspending rather than raising it is political. "House Republicans seem to think that a vote to suspend the debt limit is less toxic to conservatives than a vote to raise the limit," Binder notes. But it's a highly unconventional move that raises a slew of questions.

Steve Bell of the Bipartisan Policy Center, a former Senate budget staffer, says that the debt limit hasn't been handled this way since at least World War II. By picking a date rather than a dollar amount to raise the debt limit, the proposal raises some significant questions about how the government will deal with spending during that three-month period. The debt-limit deal is only meant to cover obligations that require payment before May 19. That means the Treasury can't borrow gobs and gobs of money just before the deadline just to keep us from hitting another debt-ceiling. But there are certain obligations such as tax refunds that don't have a "very clear mandate" as to when they need to be paid, Bell explains.

Right now, it's also unclear whether May 19 is the drop-dead date for hitting the debt ceiling, or whether the Treasury Department will again be able to invoke its "extraordinary powers" to buy a few more weeks' time. (I've queried Treasury and will update the post if and when I hear back.)

All this could lead to more turbulence for a market that's already nervous about the debt-ceiling standoff. "Markets don't like new things," Bell said. "It is not only different, it raises all sorts of uncertainties that will have some discernible impact on short-term rates and market behavior."

Bell points out that the Treasury Department has some tools at its disposal to ward off some of the negative impact, by changing the duration of when government bonds come due, for instance. But if the bill passes as is, both legislators and the administration will have some explaining to do about a highly unusual proposal.

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