Five Key Facts about the House Debt Limit Bill

On Wednesday, the House will vote on a bill to delay the upcoming debt limit showdown. The bill includes no spending cuts, no tax increases, and no platinum coins of unusual size. Instead, it will “suspend” the debt limit through May 18 to give lawmakers time to pass a budget in each chamber. To give them extra incentive, it also includes a new twist: If they fail to pass a budget by April 15, it will withhold their pay.

Here are five things you should know about the bill.

1. The bill doesn’t just suspend the debt limit, it raises it.

Section 1(a) of the bill suspends the debt limit through May 18. You might think that the current limit would go back into effect on May 19. And it would, except for section 1(b) which increases the debt limit to reflect new debt issued between now and then.

The bill thus increases the debt limit by an amount to be determined later. That unusual structure lets lawmakers tie the debt limit increase to a specific date, rather than an amount. It also means they get to increase the debt limit, presumably by several hundred billion dollars, without having to expressly vote for such an amount.  It’s a less transparent, and therefore less painful, way to increase the debt limit.

2. Treasury can’t build up an enormous cash hoard.

In principle, Treasury could use this reprieve to build up a pile of cash before the new limit is determined on May 19. For example, Treasury could issue an extra $500 billion in debt and hold the proceeds as cash to cover deficits once the new limit is in place.

But the bill drafters already thought of that. To prevent such gaming, the bill limits the obligations that could be financed with new debt. An obligation isn’t covered “unless the issuance of such obligation was necessary to fund a commitment incurred by the Federal Government that required payment before May 19, 2013.” In short, no funny stuff.

3. Nevertheless, the bill could allow Treasury running room well beyond May 19.

We first hit the debt limit on New Year’s Eve. Since then, Treasury Secretary Geithner has raised cash by engaging in extraordinary (albeit now-familiar) measures such as stuffing IOUs into federal employee retirement accounts in place of the federal debt they own.

A big question is whether the bill would allow the Treasury Secretary to undo those extraordinary measures and reload for the next time we hit the debt limit. The folks at the Bipartisan Policy Center, who do a great job tracking the debt limit, believe that it would. If so, the bill would put off the day of debt limit reckoning well beyond May 19.

4. Because of a constitutional issue, the bill threatens to delay congressional pay, not eliminate it.

With prompting from the group No Labels, lawmakers had toyed with the idea of not paying the members of Congress if they fail to pass a budget resolution by April 15 (“No Budget, No Pay”). But that idea ran afoul of the 27th Amendment  (the weird one that was ratified in 1992 after passing Congress back in 1789). It says:

No law, varying the compensation for the services of the Senators and Representatives, shall take effect, until an election of Representatives shall have intervened.

To avoid “varying” the amount of compensation, the bill would escrow congressional pay until each chamber passes its budget or the end of the 113th Congress. In short, No Budget, No Pay Until January 2015.

5. Members of Congress don’t need to enact a budget to get paid on time.

The bill doesn’t require that lawmakers actually enact a budget. That would be a hard task, since it would require the Republican House to agree with the Democratic Senate on a budget plan.

Instead, the bill focuses on the first steps of the process, in which the House and Senate pass their own budget resolutions. If the House passes a budget, its members would get paid on schedule, and the same for the Senate (which hasn’t done a budget for several years). But there is no new penalty if the House and Senate can’t agree on a final budget.

8 thoughts on “Five Key Facts about the House Debt Limit Bill”

  1. At first I liked the idea of no budget no pay but now I am wary of it. Since Congress writes its own rules there is nothing to stop them from reinstating their salary if they take too long. But also the fact that they just have to pass a budget in each chamber not the same budget in both chambers is a problem. That is not a real budget, it is a starting point for negotiations.

    Really this is nothing but Congress pussyfooting around.

  2. I’m not so sure about your second point, Don. The provision telling Treasury that it can only borrow the money it needs is unenforceable. What if Treasury decided to issue additional debt between now and the May deadline? Who would have standing to challenge that action in court? And if such a plaintiff were found, the remedy would be repudiation of Treasury debt, which is the very outcome that this stopgap measure is designed to avoid. The only real restraint on government borrowing between now and May 19 is the appetite of markets — and of the Fed — for treasuries. That and the integrity of the present Administration.

    To be clear, I do believe that this tactic is a prudent one, given the weakness and disarray of Congressional Republicans. Changing the sequence of confrontations with the President seems reasonable in the circumstances. The first key test will come a month from now when Congressional Rs will be forced to accept steep cuts in military spending should the President continue to resist negotiation. If our guys are willing to shoot that hostage — and accept the consequences of a 10 percent cut to the national security budget — then we will at least have some leverage with the President, who will be concerned about cuts in outlays for social programs. At least the dispute will be exclusively about spending instead of about the federal government’s creditworthiness.

    My fear is that we will be as divided in late February as we are in late January, with a substantial bloc of Republicans unwilling to stomach sequestration. If that is the case, then this tactic will have largely failed.

    Still, it’s worth a try.

  3. The entire compromise is a political stunt to keep the debates going. It delivers political fodder for their constituents to debate over while the Congress as a whole gets little to nothing done. The connection between their pay and their execution is laughable seeing that the Constitution stipulates that Congress must get paid.

    A added note is that a majority of the members of Congress are millionaires; a whomping 250 plus of them have this economic status, so what is the delay in pay really going to mean to them (even if they really did hold their pay, which they will not do)?

    A lot of the issues you listed are par for the course when you raise the debt limit in even the slightest, but the question that America should be asking is “Why do we continue to have this arbitrary debt ceiling number?” America is the only country, of the organized countries, that ties its ability to pay its debt to a self-inflicted limit. Republicons talk about fiscal sanity and yet they think that it makes fiscal sense to not pay America’s Congress approved financial obligations. AMAZINGLY STUPID!

  4. What a circle jerk! Super-committees, suspending the automatics cuts, kicking the debt ceiling can down the road and “new borrowing” not to be confused with “old borrowing.” No budget since ’09.

    You cannot make this up. The best part? Prior to the election, Congress had a 91% dis approval rate. Voters returned 94% of the incumbents.

    I’d call Dem and GOP voters idiots but it seems redundant.

  5. Why not just go bankrupt and issue new currency? The govt still has all the uranium and plutonium needed to back another fiat currency, just as succesfully as they’ve backed the Federal Reserve Notes . Do they just love theatrics or do they need to stall for time until they finish looting the treasury?

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