There was growing consensus in Washington this week that the nation’s debt limit needs to be dealt with quickly to avoid further scaring a shaky market, which this week saw abysmal housing numbers and a slight uptick in the unemployment rate.
Treasury Secretary Tim Geithner has said repeatedly that the debt limit must be raised by Aug. 2 to avoid default on U.S. loans. He confirmed in mid-May that the government’s statutory debt limit has, indeed, been reached, though Treasury is working to move money between accounts to maintain its obligations.
Though Aug. 2 is a number of months away, it is not long for Congressional leaders and Administration officials to come to an agreement that is palatable enough to get through a divided Congress increasingly concerned about the nation’s fiscal situation.
The disagreement on what must happen to get passage of a debt limit deal is classic – Republicans insist on dramatic spending reductions that could include restructuring programs generally considered too sacred to touch, while Democrats insist on revenue-raisers – taxes – in addition to cutting back on programs.
Continued discussions about how to deal with this near crisis was the key action this week in Washington, with House Leaders from both parties meeting separately with President Barack Obama and Geithner meeting with Republican freshmen, who will probably be the hardest group to convince of the need for action.
On Tuesday, the House rejected by a 97 to 318 vote a bill to increase the debt limit by $2.4 trillion without spending cuts. The bill was not intended to pass and was brought to the floor by Republican leaders to demonstrate Members’ zeal for spending cuts.
Vice President Joe Biden is leading a bipartisan and bicameral group negotiating longer-term debt reduction measures, which are seen as a linchpin for a debt limit deal. That process has reportedly included talk of reducing agriculture funding.
But House Speaker John Boehner (R-Ohio) said this week he wants to see the issue resolved by the end of the month and wants direct involvement from Obama, telling reporters, “It’s time to play large ball, not small ball.”
All efforts now appear to be aimed at avoiding a last-minute deal like the FY2011 final spending package, which could roil markets around the world concerned that the U.S. economy and stable money supply are faltering.
Source: National Association of Wheat Growers