While it is not news that the GOP has proposed a temporary debt ceiling extension that would suspend the provisions of the debt ceiling target until May 19, as was reported last week, however which would demand that the Senate do something unthinkable, and something it has not done for 4 years, namely pass a budget by April 15, it is news that as The Hill reports, the vote to suspend the debt ceiling in the House will take place "as soon as Wednesday."
From The Hill: "While past measures to address the debt limit have simply increased the borrowing cap, the House bill would actually suspend the debt limit for three months. Then, on May 19, the debt limit would be automatically increased from $16.4 trillion to accommodate whatever additional borrowing the Treasury had done during that time frame. The House Rules Committee posted the text of legislation as Washington prepared for President Obama’s second inauguration. In addition to preventing default, the bill would withhold members' pay if Congress fails to pass a budget by April 15."
As we explained last week, this is merely a plan to shift fiscal (ir)responsibility into the Democrat camp, as it is virtually impossible that America can have a budget now or ever again. After all with $1 trillion deficits as far as the eye can see, the possibility to bluster and claim one is fiscally responsible while demanding $4 trillion in debt until 2016, will hardly fool the majority of the people any more of the time. Sure enough, Pelosi's response has made it quite clear this entire plan is DOA: "the proposed three-month debt- limit increase does not relieve the uncertainty faced by small businesses, the markets and the middle class. This is a gimmick unworthy of the challenges we face.”
That clears it up.
More from The Hill:
House Republican leaders are using the bill to put pressure on Senate Democrats to pass a budget, which they have failed to do for over four years.
“Before there is any long-term debt limit increase, a budget should be passed that cuts spending,” Speaker John Boehner (R-Ohio) told the Republican conference Friday in remarks to close the party’s three-day retreat in Williamsburg. “The Democratic-controlled Senate has failed to pass a budget for four years. That is a shameful run that needs to end, this year.”
Leading Senate Democrats have said they will produce a budget resolution that will included increased revenues, and will consider the debt limit boost set to come from the House.
House Republican leaders have billed their measure as "no budget, no pay." But the bill would not actually eliminate pay for members of Congress if there is no budget in place by April 15. Rather, if a chamber of Congress, such as the Senate, fails to pass a budget by April 15, all income earned by members of that chamber would be set aside. Members would receive that pay in full once a budget is passed, or on the final day of the 113th Congress at the end of 2014.
This arrangement was struck as a way to avoid running afoul of the 27th Amendment of the Constitution, which states that no law varying the compensation of members of Congress can take effect until a new Congress is in place — members cannot vote to give themselves raises or pay cuts.
Needless to say, the word "budget" to the democratically-controlled senate is like garlic stew to a graveyard of vampires:
Senate Majority Leader Harry Reid’s spokesman, Adam Jentleson, said in a statement that the House must pass a “clean” debt-limit increase. He didn’t address Cantor’s statement about requiring members of Congress to forfeit their pay if a budget isn’t adopted.
House Democratic leader Nancy Pelosi’s spokesman, Drew Hammill, said in a statement that the proposed three-month debt- limit increase “does not relieve the uncertainty faced by small businesses, the markets and the middle class. This is a gimmick unworthy of the challenges we face.”
Political divisions in Congress pose limits to the ability of Republicans to achieve their long-term goals of deep cuts in spending, Budget Committee Chairman Paul Ryan of Wisconsin told reporters at the retreat two days ago.
Ryan said Republicans want “a two-way discussion between Democrats and Republicans and out of that hopefully some progress being made on getting this deficit and debt under control.”
The last time the Democratic-led Senate adopted a budget was in April 2009. The Senate and House are supposed to pass budget resolutions early each year to set a spending framework, though there is no enforcement mechanism. Without a budget resolution, appropriations bills allocate money for the federal government.
Leaders said the tactic of short-term debt-limit increases was used in the 1980s during the presidencies of Ronald Reagan and George H.W. Bush as a prelude to broader agreements on spending cuts.
“No one is talking about default, no one wants to default,” South Carolina Republican Mick Mulvaney, who voted against the 2011 debt-ceiling deal, said in an interview yesterday with Bloomberg Television’s “Capitol Gains” program airing tomorrow. There is a “lot of support growing” among the rank and file for a short-term debt limit, he said.
Finally, Obama has been quite clear on the issue:
Obama has said he won’t negotiate the terms of a debt-limit legislation the way he did in 2011, and he is demanding more tax revenue to accompany further spending cuts. House Speaker John Boehner, an Ohio Republican, has said that any increase in the debt ceiling would have to be accompanied by commensurate spending cuts.
At the end of the day, the debt ceiling will naturally pass, as otherwise the market's ascent to new all time highs may be hindered.
Recall the sequence of events:
- Fed monetizes deficit, issues trillions in debt as collateral for reserves
- Banks use reserves, transformed under shadow banking, to boost risk assets, and otherwise invest in the capital markets
- The stock markets grinds higher, as the economy does not grow, generating even more deficits
- Even more deficits mean even more debt has to be monetized by the Fed, going back to step 1.
- Sometimes the market has to plunge just to remind Congress who is in charge and that without a debt ceiling hike, there will be no more under the table pennies on a dollar kickbacks from Wall Street to D.C.
And that, in a nutshell, is the game.