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Desire to Avoid Another Debt Limit Battle Before Election Driving Policy

The deficit hawks control the debate over more stimulus (photo: twolf1)

This week, the White House will ask Congress for the second tranche of increases to the debt limit, as negotiated in the August deal. The conditions for the second debt limit increase have been satisfied by the pulling of the trigger, caused by the collapse of the Super Committee. Republicans can only stop this second increase through a “resolution of disapproval,” a vote that the President can then veto. Not only would Republicans be unlikely to override that veto, but the last time around, on the first tranche of the debt limit increase, the resolution of disapproval didn’t even pass the Senate and get to the President, as Democrats voted in lockstep to block the resolution.

I’m not so interested in the process as much as the numbers, which offer some insight into this insistence that expiring measures like the payroll tax and unemployment insurance be paid for. By the end of the month, the debt limit will rise to within $100 billion of the current cap, which is $15.194 trillion. The authorized increase would be for another $1.2 trillion

In numbers that came out earlier this month, the deficit under current law for Fiscal Year 2012, ending September 30, is set to be right around $1 trillion. That doesn’t leave a lot of wiggle room for the White House to get to the next election without having to deal with the debt limit again, especially if new measures like the payroll tax go unfunded. Even a long-term funding mechanism would increase the FY2012 deficit in the short term and require additional borrowing. But limiting that with pay-fors that have a modest effect in 2012, or allowing things like the expiration of Extended Benefits in several states in 2012, would save money that would otherwise cause the debt limit to potentially be breached before the 2012 election.

That seems to be the motivating factor here. The White House simply does not want to go through another bruising debt limit fight again before the election. That places a limit on borrowing in the next fiscal year. It explains why the “fight” over the American Jobs Act wasn’t that major a fight, because passing all of the measures without paying for them immediately would require raising the debt limit again. And paying for them immediately would make the stimulative effect irrelevant. A couple of the measures, like the payroll tax and unemployment benefits, could conceivably pass while allowing the Treasury to squeeze past the elections under the debt limit. But the numbers are pretty close.

Years from now we will learn about all the policy choices designed to keep the nation under the debt limit to avoid a political fight until a new Congress gets seated in early 2013.

UPDATE: Dave Weigel digs out an amusing sidelight to this. Under the debt limit deal, after the President asks for the increase, Congress has 15 days to vote on the resolution of disapproval. But Congress will be out of town until January 17. So by asking for the second increase now, the White House assures that the resolution of disapproval will never even get a vote.

CommunityThe Bullpen

Desire to Avoid Another Debt Limit Battle Before Election Driving Policy

This week, the White House will ask Congress for the second tranche of increases to the debt limit, as negotiated in the August deal. The conditions for the second debt limit increase have been satisfied by the pulling of the trigger, caused by the collapse of the Super Committee. Republicans can only stop this second increase through a “resolution of disapproval,” a vote that the President can then veto. Not only would Republicans be unlikely to override that veto, but the last time around, on the first tranche of the debt limit increase, the resolution of disapproval didn’t even pass the Senate and get to the President, as Democrats voted in lockstep to block the resolution.

I’m not so interested in the process as much as the numbers, which offer some insight into this insistence that expiring measures like the payroll tax and unemployment insurance be paid for. By the end of the month, the debt limit will rise to within $100 billion of the current cap, which is $15.194 trillion. The authorized increase would be for another $1.2 trillion

In numbers that came out earlier this month, the deficit under current law for Fiscal Year 2012, ending September 30, is set to be right around $1 trillion. That doesn’t leave a lot of wiggle room for the White House to get to the next election without having to deal with the debt limit again, especially if new measures like the payroll tax go unfunded. Even a long-term funding mechanism would increase the FY2012 deficit in the short term and require additional borrowing. But limiting that with pay-fors that have a modest effect in 2012, or allowing things like the expiration of Extended Benefits in several states in 2012, would save money that would otherwise cause the debt limit to potentially be breached before the 2012 election.

That seems to be the motivating factor here. The White House simply does not want to go through another bruising debt limit fight again before the election. That places a limit on borrowing in the next fiscal year. It explains why the “fight” over the American Jobs Act wasn’t that major a fight, because passing all of the measures without paying for them immediately would require raising the debt limit again. And paying for them immediately would make the stimulative effect irrelevant. A couple of the measures, like the payroll tax and unemployment benefits, could conceivably pass while allowing the Treasury to squeeze past the elections under the debt limit. But the numbers are pretty close.

Years from now we will learn about all the policy choices designed to keep the nation under the debt limit to avoid a political fight until a new Congress gets seated in early 2013.

UPDATE: Dave Weigel digs out an amusing sidelight to this. Under the debt limit deal, after the President asks for the increase, Congress has 15 days to vote on the resolution of disapproval. But Congress will be out of town until January 17. So by asking for the second increase now, the White House assures that the resolution of disapproval will never even get a vote.

UPDATE II: Via email, the Treasury Department correctly informs me that this would be the third increase in the debt limit arising from the August deal. There was a small increase immediately, followed by the increase that was approved shortly thereafter, followed by this third increase.

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David Dayen

David Dayen