Debt Ceiling
Washington, D.C.’s explosion in spending, a trend that has accelerated since early 2009, means that the federal government now borrows approximately 43 cents of every dollar it spends. Since early 2009, when the federal debt limit was about $12 trillion, Congress has had to resort to debt limit increases of a scale never before imagined.
On May 16, 2011, the federal government’s legal authority to borrow additional funds in excess of the statutory limit of $14.29 trillion was reached. The Treasury Department announced it had sufficient revenues and assets to undertake “extraordinary measures” to continue all federal programs until August 2, 2011. Without further legal authority, the Treasury Department indicated that shortfalls in asset holdings and revenues could undermine the continued payment of federal obligations and may result in a downgrade of the United States' historic AAA government bond rating. Because a rating determines the international bond market’s assessment of a government’s credit worthiness, a downgrade would likely result in a rise in interest rates for the federal government and the interest rates of the average American borrower.
Congress deliberated several means to address the fiscal and credit issues facing the country. Today, the House and Senate approved, and the President signed, legislation to raise the legal borrowing authority in two steps, combined with a number of spending cuts and restraints on future spending. This came on the heels of the House and Senate considering several proposals.
Under the two-step process, Congress enacts $917 billion in deficit reduction and authorizes the President to raise the legal borrowing limit by $900 trillion. These spending savings are enforced with long-term discretionary caps and across-the-board cuts.
Under the second step, the legislation creates a special Congressional panel to report recommendations for a further deficit reduction of at least $1.5 trillion by the end of November 2011. Should legislation be enacted to achieve at least $1.2 trillion or greater in savings, or both houses of Congress approve a Balance Budget Amendment to the Constitution, the President would be authorized to seek a further debt limit extension of an equal amount, up to $1.5 trillion. If the panel does not achieve its savings target, or Congress does not approve the Constitutional amendment, $1.2 trillion in automatic across-the-board spending cuts would be implemented.
Listed below are several pieces of legislation under consideration, as well as links to news articles and other presentations; the links are provided for research and resource convenience only and their presence here should not be construed as my support or opposition to any of the measures below.
- Read the Budget Control Act of 2011 as amended in the Senatehere.
- The Congressional Budget Office (CBO) scored the Budget Control Act. You can read that report here.
- Read Senate Majority Leader Harry Reid’s debt ceiling bill here.
- See House Speaker John Boehner’s PowerPoint presentation outlining the debt limit deal here.
- The Wall Street Journal reported on the Budget Control Act of 2011 as amended by the Senate. You can read the article here.
- The Americans for Tax Reform issued a press release on the debt limit deal, you can access their press release here.
