Tags: debt | us | economy | ceiling | limit | borrowing

Sources: Treasury Suggests Raising Debt Limit by $2 Trillion

Wednesday, 04 May 2011 02:57 PM

 

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The Treasury has told lawmakers a roughly $2 trillion rise in the legal limit on federal debt would be needed to ensure the government can keep borrowing through the 2012 presidential election, sources with knowledge of the discussions said.

Obama administration officials have repeatedly said that it is up to Congress to decide by how much the $14.3 trillion debt limit should be raised.

But when lawmakers asked how much of an increase would be needed to meet the government's obligations into early 2013, Treasury officials floated the $2 trillion working figure, Senate and administration sources told Reuters.

Former Treasury officials have said it is routine for Congress to ask the Treasury Department for guidance. Republican leaders have asked the White House to provide the size of any proposed increase before the two sides sit down on Thursday to discuss the debt limit face-to-face.

"We have not specified an amount or a time frame. We think that should be left up to Congress," Mary Miller, Treasury's assistant secretary for financial markets, told reporters on Wednesday.

She also said it would be better to raise the debt ceiling enough so that the government does not bump up against it so frequently.

"Obviously, a longer period of time between these activities would be beneficial in terms of the work that goes into preparing for a debt limit increase. But again, you know that's not the Treasury's call," she said.

A Reuters analysis of Treasury's borrowing needs forecast Congress would have to raise the debt ceiling by more than $2 trillion to get through next year's election without having to revisit the issue.

According to the Treasury, the government borrows on average about $125 billion per month.

Meanwhile, top Republicans on Wednesday pressed the White House to reveal its proposed terms for a deal to raise the debt ceiling.

With the United States expected to hit its $14.3 trillion debt limit in the next two weeks, pressure is building in Washington to ensure the government can continue borrowing and avert a default that would roil markets across the globe.

Republicans and some Democrats say they won't back an increase without an agreement to ensure that debt levels remain manageable over the long term, but the two parties remain divided on what steps would be needed.

With several deficit-reduction proposals floating around Capitol Hill, Vice President Joe Biden is scheduled to meet with top lawmakers from both parties at 10 a.m. EDT on Thursday to see if a deal is possible.

The two Republicans who are expected to be at the meeting said on Wednesday they wanted to first see the administration's opening bid in writing.

Assistant Senate Republican Leader Jon Kyl and House of Representatives Republican Leader Eric Cantor told Biden in a letter they wanted to know the size of any proposed debt-limit increase, as well as any other elements the White House wants to include to reduce spending and reform the budget process.

"We believe a detailed proposal from the president will be the key to the success of the working group," the letter said.

The Obama administration has said it is up to Congress to determine how large an increase is needed. Treasury Department officials have told lawmakers that an increase of roughly $2 trillion is needed to ensure that Congress won't have to tackle the issue again before the November 2012 elections, according to Senate and administration sources.

Polls show Americans are strongly opposed to a debt-ceiling increase amid growing concern about the country's mounting debt load. There are also fears of a protracted round of brinkmanship that could rattle markets and drive up the government's borrowing costs.

Treasury says it will be able to stave off default until early August using a variety of tactics, but has urged Congress to act well before then.

No decisions have been made on a timetable for bringing the issue up for a vote in the Republican-controlled House, said a spokesman for House Speaker John Boehner.

Boehner would prefer "to deal with this sooner rather than at the last minute," his spokesman Kevin Smith said.

The country's total debt has more than doubled over the past 10 years as Washington cut taxes while pursuing wars in Iraq and Afghanistan.

The deepest recession since the 1930s blew an even deeper hole in the budget, and annual deficits have hovered near 10 percent of gross domestic product in recent years.

Republicans and some Democrats have voiced skepticism about the Biden meeting, calling it a sideshow to other efforts to forge a deal that could win enough votes to pass both the House and the Democratic-controlled Senate.

One closely watched group of senators known as the "Gang of Six" had hoped to release its proposal this week, but postponed activity until next week after one of its members, Republican Senator Tom Coburn, left town for a family matter, according to an aide.

Any effort to reach a deal will have to come amid reluctance by liberals to cut popular entitlement programs and conservatives' resistance to increased tax revenue.

One proposal that has gained some support would mandate automatic spending cuts and tax increases if Congress did not meet deficit-reduction targets on its own. That approach would give lawmakers more time to figure out exactly what steps would be needed.

"It is my hope that this type of proposal can help us get our deficits and debt under control, so our economy can grow and create the jobs Americans deserve," said Democratic Senator Max Baucus, who is expected to take part in the Biden meeting on Thursday.

© 2014 Thomson/Reuters. All rights reserved.

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