By Nish Amarnath January 30, 2013
The House of Representatives passed a bill last week that would temporarily suspend the debt ceiling in order to keep the government operating, but at least one analysis suggests the bill could have unintended consequences.
The five-page bill, which allows the government to continue to meet its financial obligations until May 19, is designed to give Congress more time to reach a longer-term solution that would stave off the automatic cuts scheduled to kick in March 1 and to pass a budget for the coming fiscal year.
However, by pegging the debt limit to a particular date rather than a specific amount, the actual increase to the federal debt cannot be known until the suspension ends, according to a recent report from the Bipartisan Policy Center, a Washington-based think tank that monitors the national debt. That could put the Treasury in a difficult position and leave the government with a whole new deadline to worry about.
Here are the report’s main points:
• The bill would raise the federal debt limit currently set at $16.4 trillion by the amount the government spends to pay its bills through May 18, estimated at approximately $450 billion. The new debt ceiling would be roughly $16.9 trillion.
• The debt ceiling increase does not include the steady stream of emergency funding the Treasury approved to fund government operations since the start of this year. (To date, these emergency funds have reached approximately $25 billion.) Each day the debt ceiling remains active, the Treasury spends more.
• As a result, when the debt ceiling is reinstated on May 19, the national debt would exceed the new debt ceiling by the amount the Treasury has drawn down in emergency funds. At that point, the Treasury would be forced to draw down more emergency funds right away or spend cash reserves to keep the government in operation.
• Assuming the bill is made law by the end of January, the Treasury would have enough in reserve to keep the government afloat through the end of July.
Read the full report here.
Read the bill here.
This entry was posted on Wednesday, January 30th, 2013 at 5:35 am. It is filed under Tools & Resources and tagged with Bipartisan Policy Center, congress, debt, debt ceiling, fiscal cliff, House, Treasury. You can follow any responses to this entry through the RSS 2.0 feed.
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