U.S. Hits Debt Ceiling; Congressional Battle Looms on Limit

May 16, 2011 | By Adrianne Fielding | Post a Comment

“Today, the United States has reached the statutory debt limit.” That’s not really the sentence that you want to read with your Monday morning coffee, but today, that was the introductory sentence in the letter that Congress received from Treasury Secretary Timothy Geithner.

In the letter, Secretary Geithner notified Congress that he has declared a “debt issuance suspension period” for certain government pension funds, as his predecessors have done in similar circumstances, which is scheduled to last until August 2, 2011.  That action allows the Treasury Department to fulfill other funding obligations that have been made by current and past Congresses – including, presumably, grant-related funding commitments.

Secretary Geithner notes that “by law, the [pension funds] will be made whole once the debt limit is increased” and that “Federal retirees and employees will be unaffected by these actions.”

What happens now?  The ball is in Congress’ court, as leaders from both houses and both political parties ratchet up the rhetoric and the deal-making as they determine whether to raise the debt ceiling and at what (political and economic) cost.  Will federal pensions take the hit, effectively forcing employees whose pay is already frozen to take a pay cut?  Will corporate and individual taxes remain sacrosanct, as House Speaker John Boehner (R-Ohio) has promised? Is it a game of chicken or a case of Chicken Little?

As Geithner implores Congress to “raise the debt limit in a timely manner in order to uphold the full faith and credit of the United States,” it threatens to be a muddy tug of war up on Capitol Hill.

Ezra Klein offered his analysis of the debt ceiling debates and related issues on the Wonkbook blog this morning.

In an interesting twist of timing, a survey released last week found that “Beltway influencers” are increasingly worried about nation’s deficit and debt, yet differ on the likelihood of fixing them.

The level of concern increased significantly among the 300 leaders and opinion elites who participated in the latest in a series of surveys that were conducted by Public Agenda and supported by the John D. and Catherine T. MacArthur Foundation.  While the leaders expressed greater optimism than opinion elites about resolving the issues, heavy majorities from both political parties believed that concrete options do exist.

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