Here we go again… Déjà vu… The sequel… Whenever Treasury Secretary Jack Lew talks about the United States debt limit and how it needs to be raised as soon as possible (once again) it’s as if we’ve already seen this motion picture.
Writing in a letter sent to House Speaker John Boehner and other House and Senate leaders over the weekend, Lew warned that the country will hit its debt limit on Mar. 16, but with some “extraordinary measures” (where have we heard that term before?) the Treasury will be able to fund the government on a “temporary basis.”
Lew noted that raising the debt limit will not actually be approving new spending but allow the federal government to pay for its current expenditures. Also, the Treasury Department will be required to suspend the issuance of some local and state securities as of Mar. 13.
“Increasing the debt limit does not authorize new spending commitments. It simply allows the government to pay for expenditures Congress has already approved, thereby protecting the full faith and credit of the United States. Only Congress is empowered to increase the nation’s borrowing authority, and I hope that Congress will address this matter without controversy or brinksmanship,” wrote Lew.
“Accordingly, I respectfully ask Congress to raise the debt limit as soon as possible.”
The Treasury Secretary’s words of caution come as the Congressional Budget Office (CBO) issued a new report that stated if the federal debt limit is not increased then the Treasury Department will exhaust its entire borrowing capacity and be out of money in October or November of this year.
This is where these “extraordinary measures” come in because they usually allow the government to cover its bills around the autumn time.
As previously noted, we’ve seen this play out before. In 2011, the Obama administration and the Republican leadership were at a standstill about spiking the debt limit. In the end, they came to an agreement to raise the debt in exchange for supposed budget cuts (two percent). Although the sequester was portrayed as a budget cut, the federal government actually increased spending in the long run.
Kentucky Republican Senator and possible 2016 presidential candidate Rand Paul puts it succinctly in this interview with CNN in 2013: “To clarify what the sequester cuts are, they’re a cut in the rate of increase of spending, because over ten years, even with the sequester, government will grow. It goes down for a year or two, but over 10 years, it grows.”
With the presidential race already upon us, the Republicans will likely refrain from grandstanding and push ahead with hiking the debt limit, while the Democrats will say how important it is to raise it. Ah, Washington is nothing but theatrics.
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