Skip to content

House GOP pushes plan to raise debt ceiling; Jack Lew warns against default

October 10, 2013

The administration has many options at it’s disposal to easily reduce the debt limit. However this isn’t really about the debt ceiling, it’s about Obamacare and the destruction that the administration knows it will cause. Their plan is to implement Obamacare which will indeed bring the destruction of the United States. Weighing the debt against the funding of Obamacare is a no brainer! The debt that the United States supposedly owes is a false debt, the American people have been manipulated into thinking that this debt is actual when it is absolutely not. Obama is running a game and unfortunately I see Boehner conceding the debt limit and allowing Obamacare to be funded. Causing the collapse of our economy and our nation. Pray and prepare.

Divine Freedom

House Republican leaders are pushing a six-week increase in the debt limit, without any conservative strings attached, to calm jittery financial markets, according to senior GOP advisers.

The plan was presented to the House GOP caucus Thursday morning after Treasury Secretary Jack Lew warned lawmakers that he would be unable to guarantee payments to any group — whether Social Security recipients or U.S. bondholders — unless Congress raises the federal debt ceiling.

If the GOP plan goes over well with rank-and-file Republicans, Speaker John A. Boehner (R-Ohio) could put the legislation on the floor for a vote late Thursday, aides said.

[See the latest updates on the shutdown.]

Financial markets soared on the first sign of optimistic news out of Washington in almost a month, with the Dow Jones industrial average up 169 points in the first 15 minutes of trading. The emerging plan would not deal with the now 10-day-old shutdown of the federal government, an issue that would move onto a separate track of talks.

The plan would meet President Obama’s demand for an increase in Treasury’s borrowing authority without any legislative riders, meaning that Democrats would likely support the plan and it could be signed into law. But it would set the stage for tough negotiations, possibly lasting until Thanksgiving, over bigger fiscal matters, since the tentative plan calls for only a six-week increase of the debt limit.

Advisers cautioned that Boehner’s often unruly caucus, which has repeatedly rejected leadership initiatives in the past, needs to sign off on the plan before it can advance.

Financial experts much prefer a longer-term extension of the debt ceiling, but even a brief extension would ease some of the turmoil that has been brewing on Wall Street. By the time markets closed Monday afternoon, the Dow had dropped 900 points in 14 trading days, losing almost 6 percent of its value.

Just three weeks ago, Boehner’s leadership team presented a plan to lift the debt ceiling accompanied by a one-year delay of Obama’s health-care law and a litany of other conservative domestic policy demands.

With Washington in gridlock and a key deadline in the debt-limit debate just one week away, Lew told the Senate Finance Committee Thursday morning that he would do all he can to minimize the pain of breaching the $16.7 trillion debt limit. But Lew also told the senators that in an unprecedented situation in which he would be relying entirely on the erratic flow of incoming revenue, the economy would suffer and there would not even be certainty that the government could make all interest and principal payments.

“No credible economist or business leader thinks that defaulting is good for job creation or economic growth,” Lew said. “If Congress fails to meet its responsibility, it could be deeply damaging to the financial markets, the ongoing economic recovery, and the jobs and savings of millions of Americans.”

Rep. Jim Jordan (R-Ohio), a key conservative with ties to leadership and more junior tea party-backed colleagues, said Thursday morning that he and his colleagues “potentially” could support the new GOP debt-ceiling plan.

“We think there needs to be some movement in dealing with the overall problem,” he said. “It’d be nice to get some dollar-to-dollar cuts there.”

Asked whether he could support a short-term increase without related cuts, Jordan said he expected that question would be the primary topic of conversation among House Republicans on Thursday.

Amid growing anxiety about a debt default, Republicans in the House and the Senate floated ideas Wednesday for raising the debt limit — if only for a short time — in hopes of forcing Obama to the negotiating table.

One of the most significant ideas was brewing in the House, where Budget Committee Chairman Paul Ryan (R-Wis.) briefed conservatives on a plan to raise the debt limit for six weeks, which would give party leaders time to negotiate a broad agreement to overhaul the tax code and trim federal health-care and retirement spending.

The plan, which Ryan sketched in a Wall Street Journal opinion piece Wednesday, was short on details. And it called for spending cuts of roughly $200 billion to cover the cost of raising the debt limit even in the near term — although senior GOP advisers said late Wednesday that they were also considering an increase with no strings attached.

Lew’s appearance is the first public confrontation between a senior administration official and Republicans since the fiscal showdown began last month. The meeting comes as some lawmakers on Capitol Hill are questioning whether the administration has been too alarmist about the threat of going past an Oct. 17 deadline to raise the debt ceiling. Republicans have cited reports by credit-rating firms saying that the United States would not technically default unless it fails to make interest payments on its debt — which they regard as unlikely.

Echoing points made by Republican presidents and officials in prior administrations, Lew is tried to counter that argument by highlighting the broad risks of leaving the government with no borrowing authority.

“Certain members of the House and Senate believe that it is possible to protect our economy by simply paying only the interest on our debts, while stopping or delaying payments on a number of our other legal commitments,” Lew said. “The United States should not be put in a position of making such perilous choices for our economy and our citizens. There is no way of knowing the irrevocable damage such an approach would have on our economy and financial markets.”

For example, officials say, Lew pointed out that the Treasury routinely refinances about $100 billion in debt every week, paying back principal and taking on new debt. He noted that should investors back away from Treasury debt, it could make refinancing difficult and throw the country’s financial markets into even greater chaos.

Lew said the administration will face a series of difficult decisions even if Treasury can avoid what the credit-rating firms consider a default. In a scenario where federal spending will far exceed revenue, he said, the administration would have only imperfect options in deciding whom to pay. Officials say Lew will try to push Republicans to decide whom they wouldn’t pay — Social Security recipients or veterans.

“We are relying on investors from all over the world to continue to hold U.S. bonds . . .,” Lew said. “If U.S. bondholders decided that they wanted to be repaid rather than continuing to roll-over their Treasury investments, we could unexpectedly dissipate our entire cash balance.”

A Treasury official said Wednesday night that Obama would have to make the final decision in such a scenario.

Lew confronted a Senate Finance Committee stocked with Republicans who have been skeptical about the administration’s claims that breaching the debt limit would be catastrophic.

Among the committee’s members is Sen. Patrick J. Toomey (R-Pa.), who has championed the notion that the Treasury Department could avoid chaos in financial markets by continuing to make interest payments to investors.

The senior Republican on the panel, Sen. Orrin G. Hatch (Utah), has also expressed doubts about the risk of a debt-ceiling breach. But on Wednesday, Hatch acknowledged that blowing the Oct. 17 deadline would “scare the hell out of people.” And while Treasury might be able to pay interest on the debt, Hatch said, “the real question is whether it’s going to tank the stock market.”

Obama, when he meets Thursday with House GOP leaders, is planning to emphasize his refusal to “pay ransom” to avoid default and reopen the government. Ryan, nonetheless, held out hope that “tomorrow’s meeting at the White House will allow us to work together and find common ground.”

Thursday’s meeting is the second in a series the White House announced Wednesday aimed at breaking the impasse, reopening the government and raising the $16.7 trillion debt limit. Obama met first with House Democrats late Wednesday and plans to meet with each party in the Senate in the coming days, starting with a meeting with the Senate Democratic caucus Thursday.

Obama invited the entire 233-member GOP House conference to join him at the White House, but Republicans decided to send only an 18-member group comprising top leaders and key committee chairmen, including Ryan, Appropriations Chairman Harold Rogers (Ky.) and Ways and Means Chairman Dave Camp (Mich.).

“Nine days into a government shutdown and a week away from breaching the debt ceiling, a meeting is only worthwhile if it is focused on finding a solution,” Brendan Buck, a spokesman for Boehner, said in a statement. “That’s why the House Republican Conference will instead be represented by a smaller group of negotiators.”

The White House said Obama is “disappointed” by Boehner’s decision to limit Republican attendance and emphasized that Obama will not be negotiating.

“The president thought it was important to talk directly with the members who forced this economic crisis on the country about how the shutdown and a failure to pay the country’s bills could devastate the economy,” White House press secretary Jay Carney said in a statement.

Obama “will talk to anyone anytime . . . but will not pay the Republicans ransom for doing their job,” Carney said. “If the Republicans want to have a real discussion, they should open the government and take the threat of default off the table.”

Republicans on Capitol Hill, meanwhile, circulated a memo from one of the nation’s leading credit-rating agencies that seemed to play down the threat of default. In the memo, Moody’s Investors Service said the Treasury Department is likely to continue paying interest on the government’s debt even if Congress refuses to lift the limit on borrowing, preserving the nation’s sterling AAA credit rating.

“We believe the government would continue to pay interest and principal on its debt even in the event that the debt limit is not raised, leaving its creditworthiness intact,” said the Oct. 7 memo. “The debt limit restricts government expenditures to the amount of its incoming revenues; it does not prohibit the government from servicing its debt. There is no direct connection between the debt limit (actually the exhaustion of the Treasury’s extraordinary measures to raise funds) and a default.”

The memo offered a starkly different view of the consequences of breaching the debt limit than is held by the White House, many policymakers and other financial analysts. Over the weekend, economists at Goldman Sachs said the economy would take a devastating hit even if Treasury kept making payments on the debt, because the pullback in federal spending would amount to roughly $175 billion, or 4.2 percentage points of gross domestic product.

Mohamed El-Erian, the chief executive of PIMCO, the world’s largest bond company, agreed that the administration could take steps to contain the worst damage. But, he said, there would still be severe consequences.

“It would avoid a series of major and cascading disruptions to the functioning of a financial market that is at the heart of the core of the global financial system,” he said. “Having said that, equities and other risk assets would still likely sell off hard.”

Rep. Chris Van Hollen (D-Md.) noted that Moody’s analysis is geared toward the well-being of its own investors, not average Americans. “When they say their clients will be okay, they’re not talking about people on Society Security, Medicare or our troops in the field. Moody’s doesn’t give a damn about any of those people.”

Credit To:  Zachary A. Goldfarb, Paul Kane and Lori Montgomery / The Washington Post

http://www.washingtonpost.com/politics/lew-tells-senate-panel-debt-default-would-force-perilous-choices-on-economy/2013/10/10/5c1f648c-31a5-11e3-9c68-1cf643210300_print.html?utm_medium=referral&utm_source=pulsenews

Advertisements
Leave a Comment

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: