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Tag: debt limit

Senate Advances Bill To Raise Debt Limit And Avert Disastrous Default

By Richard Cowan and David Morgan

WASHINGTON (Reuters) -The U.S. Congress' months-long drive to raise the federal government's $28.9 trillion debt limit, and avert an unprecedented default, took a step forward on Thursday as the Senate advanced the first of two bills needed for the hike.

Fourteen Republicans joined the chamber's 48 Democrats and the two independents who caucus with them in voting to end debate on the first bill, spurning right-wing demands that they boycott any measure leading to an increase in the Treasury Department's borrowing authority.

"I'm optimistic that after today's vote we will be on a glide path to avoid a catastrophic default," the chamber's top Democrat, Majority Leader Chuck Schumer, said in a speech before the 64-36 vote on a measure he negotiated with Republican counterpart Mitch McConnell to speed passage.

Treasury Secretary Janet Yellen has urged Congress to raise the limit before December 15.

Republicans for months have been maneuvering to try to force Democrats to raise the debt limit on their own, seeking to link the move to President Joe Biden's proposed $1.75 trillion "Build Back Better" domestic spending bill.

Democrats note that the legislation is needed to finance substantial debt incurred during Donald Trump's administration, when Republicans willingly jacked up Washington's credit card bill by about $7.85 trillion, partly through sweeping tax cuts and spending to fight the COVID-19 pandemic.

The Senate could vote as early as Thursday evening to pass the first of two pieces of legislation needed to raise the borrowing limit to a still-under-negotiation amount intended to cover Washington's expenses through the 2022 midterm elections that will determine control of Congress.

Democrats will need only a simple majority, including Vice President Kamala Harris' tie-breaking vote, to pass the two pieces of legislation and raise the debt limit.

A final vote, in the House of Representatives, is likely on Tuesday and President Joe Biden is expected to sign both bills into law once they pass.

'Right Thing To Do'

Republican Senator Lisa Murkowski, who is up for re-election next year, told reporters that she voted to advance the first bill because "It was the right thing to do."

She added that at a time when Russia is amassing troops on its border with Ukraine, "we don't need to be sending signals anywhere in the world that we're not going to back the full faith and credit in the United States."

The break in the legislative deadlock came just two months after Congress agreed on a short-term lift to the debt ceiling, to avert an unprecedented default by the federal government on its obligations, which would have dire implications for the world economy.

For years, lawmakers have squirmed over raising the statutory limit on the country's growing debt, fearing voter backlash.

The emergence in 2010 of the conservative, small-government "Tea Party" movement increased the rancor in Congress over such legislation, even as lawmakers voted for tax cuts and spending increases that contribute to the debt.

The Bipartisan Policy Center think thank warned last week that the government could risk default by late this month if Congress does not act.

Democrats noted that they had voted in the past to authorize debt ceiling hikes to cover Republican measures, such as the Trump tax cuts.

(Reporting by Richard Cowan, David Morgan, Susan Cornwell and Moira Warburton; Editing by Scott Malone, Peter Cooney and Andrea Ricci)

'Failure Is Not An Option': Congress Debates Biden's Historic Agenda

Washington (AFP) - Joe Biden faces the most important test of his presidency this week as Democrats in the US Congress launch a highwire bid to implement his sweeping economic agenda while keeping the government's lights on.

The House and Senate are moving toward votes on legislation dealing with infrastructure and social programs worth almost $5 trillion while also averting a government shutdown on Friday and a looming debt default.

Failure on any front would be catastrophic for a president looking to cement his legacy, while Democrats would see their chances diminished for hanging onto the House of Representatives and Senate in next year's midterm elections.

"You know me: I'm born optimistic. I think things are going to go well. I think we're going to get it done," an upbeat Biden told reporters at the White House.

At stake is the fate of Biden's $3.5 trillion Build Back Better social welfare package that only Democrats support, and a $1.2 trillion infrastructure bill to improve transport networks and broadband coverage that has already passed the Senate with cross-party support.

Democratic House Speaker Nancy Pelosi told colleagues that there would be a vote on infrastructure on Thursday -- the same day Congress needs to strike a funding deal to avoid a government shutdown.

'Intensity'

Progressive Democrats in the House have repeatedly threatened to tank infrastructure without a significant commitment from their moderate colleagues on Build Back Better.

But moderates nervous about freewheeling spending have said they may not vote for the bigger bill without infrastructure crossing the line first -- and have talked about scaling back the $3.5 trillion ticket price in any case.

"The next few days will be a time of intensity," Pelosi wrote to House Democrats, who have a three-vote margin in the House, plus the anticipated support of at least 10 Republicans for infrastructure.

Biden says the two bills would save the average family $15,000 a year through expanded care and education programs and reduced drug pricing, while transforming public transport, highways, bridges and broadband internet access would make life easier and greener.

The president told reporters Monday that agreement on Build Back Better may not be completed before the infrastructure vote and shutdown deadline, although he added: "I hope it's by the end of the week."

'Week from hell'

Adding to the drama, lawmakers have until midnight going into Friday to green-light a package to fund the government ahead of federal agencies running out of money.

Failure would shut down the government, which typically leads to hundreds of thousands of workers being sent home as public services are closed.

The House passed a "continuing resolution" last week to keep the government open until December 3 -- but the evenly-divided 100-member Senate rejected the package on Monday, with Democrats failing to secure the 60 votes necessary to begin debate.

Republicans are opposed to a 14-month debt ceiling hike that was included in the wording following warnings that the Treasury Department will be unable to obtain new loans sometime in October.

They say Biden's spending plans are out of control, and that the Democrats -- who control both chambers of Congress -- should avoid the disastrous looming credit default by lifting the borrowing cap on their own.

In reality, the debt limit suspension would cover spending backed by Republicans under Donald Trump, as well as other spending already authorized by the government.

Biden, who discussed the bills via phone earlier Monday with Pelosi and Senate majority leader Chuck Schumer, slammed what he called Republican "actions that show a lack of concern about our economic recovery," according to a White House statement.

The upper chamber is now likely to send a "clean" continuing resolution back to the House to pass without the debt-limit provision, averting the shutdown for two months.

That would leave the debt-limit problem unresolved, however -- a worrying outcome that will make the markets increasingly jumpy as the mid-to-late October deadline draws closer.

"You want me to be honest? It's going to be a week from hell," Rep. Debbie Dingell told CNN on Sunday.

"But failure is not an option. There is too much at stake."

McCarthy Falsely Claims Biden Plan Will 'Add $5 Trillion' To Debt

House Minority Leader Kevin McCarthy falsely claimed on Monday that President Joe Biden's spending plan would add $5 trillion to the national debt. But he has previously acknowledged that it is funded by raising taxes on the rich and corporations.

On Fox News, the California Republican slammed the proposed Build Back Better plan — which would invest about $3.5 trillion in climate change, clean energy, health care, paid leave, child care, and free community college and pre-K — and the $550 billion bipartisan Infrastructure Investment and Jobs Act."

McCarthy charged that the bill was funded "by putting a debt onto the next generation of Americans. That's how it's paid for."

When McCarthy was asked whether any Republican would join the Democratic majority in voting to address the debt ceiling and avert a national default, he answered, "There won't be [any]. They [Democrats] want to add another $5 trillion just this week.

"Our debt as we speak today is $28 trillion. We've got about another two to sell and they want to add another five," McCarthy added.

But McCarthy is way off on these numbers.

The cost of the bipartisan infrastructure plan — which passed the Senate 69-30 in August and would invest billions in transportation, water systems, broadband, and electrical grid infrastructure — is at least partially offset by savings and additional revenue. According to a partial analysis by the nonpartisan Congressional Budget Office, more than half of it is paid for.

And Biden has repeatedly promised that the $3.5 trillion plan would be paid for by increasing taxes on corporations and those making $400,000 or more annually. "It adds zero dollars to the national debt," he tweeted on Saturday.

In an April press release denouncing "Biden's radical tax and spend agenda," McCarthy claimed Biden "plans to 'Build Back Better' by growing the government, raising taxes on American families and investments, destroying jobs, and saddling future generations with a massive debt — an agenda that will inevitably crush economic opportunity."


In May, McCarthy accused Biden of "proposing the largest tax increase in American history, including making our corporate tax rate the highest in the world."

The United States added $7.8 trillion to the national debt during former President Donald Trump's time in office — much of it with support from Republicans in Congress. In 2019, McCarthy and a bipartisan House majority opted to suspend the debt limit for the remainder of Trump's term.

The GOP's 2017 tax cut plan, which largely benefited the wealthiest Americans, increased the same budget shortfalls by severely cutting tax revenue. In 2018, the Congressional Budget Office projected that the Republican tax cuts would add roughly $1.9 trillion to the federal deficit between 2018 and 2028.

"In 2017, Republicans lowered taxes & let you keep more of your own money," McCarthy tweeted earlier this month. "Now, Democrats want to take America backward. They are going to vote to raise your taxes so they can spend more on socialist pet projects."

The proposed debt limit increase is not about paying for the new plans; it is needed to allow the government to pay for the commitments made already by this and previous Congresses and for the interest on the debt already accrued.

According to a recent report from Moody's Analytics, failure to address the debt ceiling could cost the nation's economy up to 6 million jobs, reduce household wealth by nearly $15 trillion, and increase the unemployment rate from five percent to nine percent.

A McCarthy spokesperson did not immediately respond to an inquiry for this story.

Published with permission of The American Independent Foundation.

GOP Attacks Democrats For Voting To Preserve Nation’s Credit

Republican campaigns will harshly criticize Democratic lawmakers who vote to raise the debt ceiling in the 2022 midterm elections, the leader of the GOP's Senate campaign arm said.

"They're going to get held accountable for it," Sen. Rick Scott (R-FL), who leads the National Republican Senatorial Committee, told NBC News' Sahil Kapur in an interview on Thursday.


When asked if the debt ceiling issue will be a subject of Republican campaign ads attacking Democrats, Scott responded, "Oh, you better believe it." He added that Republicans also plan to criticize Democrats if they succeed in passing the $3.5 trillion infrastructure bill that's currently making its way through Congress.

Members of both political parties have voted to raise the debt ceiling in past years. Republicans in Congress voted to increase the debt limit three times during former President Donald Trump's tenure.

During Trump's time in office, the United States added $7.8 trillion to the national debt. The GOP's 2017 tax cuts, which largely benefited the wealthiest Americans, will add roughly $1.9 trillion to federal deficits over the next decade, according to the Congressional Budget Office.

Since President Joe Biden assumed office, however, Republicans lawmakers have started using what was once a routine procedural vote as a cudgel to hold the U.S. economy hostage for their short-term political gains.

The federal government will hit its so-called "debt ceiling" sometime in October. If Congress doesn't act to raise the debt ceiling, funding for U.S. government agencies, programs and services will lapse. Further, the Treasury Department would default on the United States' debt, sending the country into an immediate recession that could wipe out 6 million American jobs and trillions of dollars in household wealth.

Senate Minority Leader Mitch McConnell — who voted to raise the debt ceiling just two years ago — has said Republicans won't vote to continue funding the government this time around.

But when Trump was president, McConnell argued that not raising the debt ceiling would be catastrophic for the country.

"I certainly don't think any Senators are rooting for a debt limit crisis that could put our full faith and credit at risk," McConnell said in 2019. "That means every one of our colleagues should actually vote for it."

McConnell is now going so far as to block the debt ceiling bill from an up-or-down vote and has vowed to filibuster the vote. He also wants Democrats to use a more complicated Senate procedure called budget reconciliation to raise the borrowing limit just with Democratic votes.

This decision has little to do with actual governance, and everything to do with scoring political points against Democrats — no matter the cost to Americans. Scott himself said this will be the GOP's playbook ahead of 2022: to hammer Democrats in ads for increasing the debt.

Still, it's unclear how effective Scott's strategy will be.

Polls have shown that 52 percent of Americans support Democrats' wide-ranging spending plan, which would make child care more affordable; give American workers 12 weeks of paid parental leave; lower the eligibility age for Medicare recipients; and add dental, vision, and hearing benefits to existing Medicare plans.

The debt limit, by contrast, is not a top concern among American voters.

An Axios/Ipsos poll from August found that "government budget and debt" ranked sixth among the most important issues for voters, behind the COVID-19 pandemic, political extremism, climate change, crime, and health care.

And a Gallup poll from August found just two percent of Americans saying that the "federal budget deficit/federal debt" is the "most important problem facing the country today."

Published with permission of The American Independent Foundation.

In Debt-Limit Impasse, Federal Reserve Will 'Come Out Swinging'

By Ann Saphir

(Reuters) -Treasury Secretary Janet Yellen says failure to raise the U.S. debt limit could lead to the unthinkable: a default on government payment obligations. That's an outcome the White House on Friday warned could plunge the economy into recession.

If the impasse in Congress over the $28.5 trillion debt limit isn't resolved before an October deadline, what would the Federal Reserve - the backstop for U.S. financial markets as the lender of last resort - be prepared to do?

As it turns out, Fed Chair Jerome Powell may already have something of a game plan. The country faced a similar crisis over the debt limit in 2011 and again two years later, and at an unscheduled October 2013 meeting, Fed policymakers - including Powell, who was then a Fed governor, and Yellen, who was the Fed's vice chair - debated possible actions in response.

'Loathsome' was how Powell described some of the most aggressive options contemplated, transcripts show, though he was among those who said they might be needed in the face of what could be a drastic market catastrophe

The plan included a process for managing government payments, given the Fed's expectation that Treasury would prioritize principal and interest but would make day-by-day decisions on whether to cover other obligations.

Changes to the Fed's supervision of banks were also planned. Banks would be allowed to count defaulted Treasuries toward risk-capital requirements, and supervisors would work directly with any bank experiencing a "temporary drop in its regulatory capital ratio." The U.S. central bank would also direct lenders to give leeway to stressed borrowers.

Policymakers also mapped out approaches to managing market strains and financial stability risks stemming from a technical default.

They readily agreed to some measures, including expanding ongoing bond purchases to include defaulted Treasuries, lending against defaulted securities and through the Fed's emergency lending window, and conducting repurchase operations to stabilize short-term financial markets.

Other actions sketched out in briefing notes and during the meeting were more controversial, including providing direct support to financial markets buying defaulted Treasury securities, or simultaneously selling Treasuries that are not in default and buying ones that are.

It was those last actions that Powell described as "loathsome," while others referred to them as "repugnant" and "beyond the pale." The issue, transcripts suggest, was the worry that such purchases could be seen as crossing a line into direct financing of government.

"The economics of it are right, but you'd be stepping into this difficult political world and looking like you are making the problem go away," Powell said at the time.

A larger number of policymakers, including Yellen and John Williams, who at the time was San Francisco Fed president and is now head of the New York Fed, felt that such an intervention ought to be part of the U.S. central bank's response if needed. Even Powell agreed it might need to be "under certain circumstances."

Congress resolved the debt limit impasse in 2013 and the Fed never had to activate its game plan. Since then it has managed through a number of crises, including the coronavirus pandemic, to which it responded aggressively and with never-before-used tools like purchases of municipal debt. "We crossed a lot of red lines that had not been crossed before," Powell said in an interview in May 2020.

Analysts say that the Fed helped stave off a financial crisis and an even worse economic downturn.

Christopher Russo, a post-graduate research fellow at the Mercatus Center at George Mason University, says the Fed's experience may color how it responds to future crises.

"The lesson learned is: if they are going to do something, come out swinging," he said.

(Reporting by Ann SaphirEditing by Paul Simao)

The Debt Limit Monster Is Coming Back

IMAGE: Flickr/Stephen Melkisethian

The Party Of George W. Bush Or Ted Cruz?

Republicans will face a clear choice in 2016: Are they members of the party that destroys the economy accidentally, or on purpose?

In the corner of unintentional destruction, we have the George W. Bush Republicans, represented by Governor Chris Christie (R-NJ).

This week during a fundraising trip in Chicago, the governor seemed to reassure donors that unless he’s in jail or asleep with the fishes, he’s running for president. And he’ll be doing it as a George W. Bush Republican.

“The guy won two national elections,” Christie said. “How easy has that looked the last eight years? He was, first, an outstanding political candidate. And I think he was grossly underappreciated by his own country and his own party as a politician.”

LOL.

Bush is misunderestimated as a politician? A guy who “won” two elections, one after failing to prevent the largest terrorist attack in American history, then followed it up by invading the wrong country. Bush’s political skill — or his willingness to defer to Karl Rove’s invidious politicization of all things — has never been in doubt. Neither has the complete yet likely unintentional failure of his governance, which cost his party the Congress, then the White House.

But praising Bush the politician is a canny move for Christie, who would compete with Jeb Bush both for donors and positioning as the “business Republican” bent on deregulating everything while stimulating the military-industrial-financial complex with tax cuts and deficit spending. That’s if the former governor of Florida decides to run, which the governor of New Jersey is obviously hoping to dissuade him from doing.

Christie has led New Jersey to a “curiously weak economy” but enthralled his party’s funders by lowering property taxes on the rich to do so. This has pleased so many billionaires that more than a month into a scandal that has destroyed any bipartisan veneer he once promised, he still has been taken as seriously as any Republican candidate for president can be.

The party’s other big dog made his latest GOP primary move this week by forcing a dozen or so of his fellow Republican senators to act responsibly when it came to not intentionally forcing America into a full economic collapse. Senator Ted Cruz (R-TX) filibustered a clean bill to raise the debt limit, forcing his colleagues to be responsible in public by doing something they’ve spent the last four years equating with treason.

Cruz decided that the GOP’s passion for threatening economic default could not be abandoned so easily, even after House Speaker John Boehner (R-OH) and Senate Minority Leader Mitch McConnell (R-KY) had crumbled so quickly that Democrats were willing to help them Dustbuster their mess up.

Cruz’s desire to extract painful concessions in exchange for raising the debt limit as Republicans did dozens of times after George W. Bush blew the surplus was first popularized in 2011 by Rep. Paul Ryan (R-WI), who also broke with his party’s leadership to vote for not paying for bills due on the spending in the budget he just negotiated.

Ryan was a leader in the movement that said the only way to fix our mounting debt is not to ask the rich to pay a dime more but to impose brutal cuts on those who are suffering most in the midst of a Great Recession. Wall Street took him so seriously, as he insisted the GOP was willing to default, that billions of wealth and America’s perfect credit rating were destroyed in weeks.

Mitt Romney’s running mate is the perfect Republican candidate because he represents both the unintentional destruction of Bush, having voted for everything the last Republican president proposed, while also being the prophet of debt doom so dire he’s willing to intentionally blow up our economy or at least destroy the safety net Americans have based their entire lives upon existing in their current form.

But Ryan’s occasional dalliances in governance and desire to cut taxes for the richest will have him competing with Christie for donors for 2016, should the congressman decide to run.

Cruz would love to cut taxes as much as any Republican but his willingness to take Tea Partying to the extreme and actually campaign against his own party distinguish him as the leader of the GOP’s far right — though the senator was a proud employee of George W. Bush.

If Republicans fail to win the Senate in 2014, Cruz has the perfect argument for an activated GOP base that is flooding millions into campaigns while spooking the “establishment” with ginned-up “activism”: We lost because we failed conservatism.

Cruz will run against any sort of immigration reform that includes legalization. He’ll run for full repeal of Obamacare. And he’ll run for shutdowns, standoffs and crises that force his party to turn on each other like rabid reservoir dogs, all the while moving the party further and further to the right. Basically, he’ll position his party as utterly unelectable, barring a complete economic meltdown.

And this will be utterly predictable until either Cruz or Senator Rand Paul (R-KY) reach the point where it’s obvious that they’re bound to cancel out each other’s candidacies. Paul voted with Cruz against the debt limit extension but has made his peace with McConnell and the establishment to help his presidential prospects. And when the two men recognize that only one intentional destroyer can survive, then their savage inclinations to destroy their opponents will actually become interesting again.

Then the winner will face the representative of the George W. Bush wing of the party. That’s when the party’s funders will remind voters with millions in spending that they care too much about their own wealth to blow it on purpose.

Senate To Vote Wednesday To Lift U.S. Debt Ceiling

Washington (AFP) – Senators will vote Wednesday on a bill extending US borrowing authority with no strings attached, a sign lawmakers want to avert another paralyzing debt showdown.

The measure, which raises the debt ceiling for the world’s largest economy until mid-March 2015, passed the House of Representatives Tuesday, and Senate leaders are proceeding with lightning speed to get the legislation on the books ahead of a snow storm threatening the East Coast.

Quick passage would mark a dramatic victory for President Barack Obama, who had demanded a “clean” extension of U.S. borrowing authority — one with no political riders or other legislation attached.

In recent years, Republicans led by House Speaker John Boehner have sought to link debt ceiling hikes to measures that slashed federal spending.

The resulting congressional battles thrust the government to the brink of default, roiled international markets and culminated in a 16-day government shutdown last October.

But with conservatives recoiling from various sweeteners floated by Boehner in recent weeks, and party leadership loathe to be blamed for another fiscal crisis, the speaker capitulated Tuesday and moved to raise the debt ceiling with no spending cuts attached.

A Senate leadership aide said the chamber will vote at 1:45 pm, beginning with a procedural measure that will require a 60-vote threshold in the 100-seat chamber.

A vote on final passage would immediately follow, sending the bill to Obama’s desk for his signature.

The $17.3 trillion debt cap was reached last Friday, but the U.S. Treasury estimates February 27 as the deadline after which the government will not be able to pay all its bills unless the ceiling is raised.

AFP Photo/Mandel Ngan