As the Fiscal Cliff discussions get progressively more acrimonious, more people are being reminded that the new and improved $16.4 trillion debt ceiling, which the US will breach in a few days, is just as important, and just as much at an impasse. Which is why the Treasury just opined on the issue, by openly supporting the "McConnell Provision" and in doing so may have made any future Cliff/Ceiling discussions more difficult as the US has effectively invoked the nuclear option, aka a Presidential Veto to effectively elimiante the debt ceiling, something which will antagonize the GOP to such an extent any potential Fiscal Cliff deal may become unfeasible.
From the Treasury's blog:
The Budget Control Act enacted in August of 2011 included a provision, authored by Senate Republican Leader Mitch McConnell, that provided for expedited votes in both houses of Congress on legislation to disapprove debt limit increases requested by the President. Congress could block an increase in the debt limit via enactment of the disapproval legislation. However, if disapproval legislation was not enacted, the requested debt limit increase took effect. The debt limit was increased three times pursuant to Senator McConnell’s mechanism.
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The McConnell Provision was designed to preserve the authority of Congress to disapprove increases in the debt limit, while at the same time making it possible for needed increases in the debt limit to take effect. The Administration supports extension of Senator McConnell’s mechanism in order to prevent a repeat of the 2011 debt limit ordeal and to ensure that the threat of default does not put the U.S. economy or the creditworthiness of the United States at risk in the future.
The market is hardly happy that the already record polarity in Congress is about to get even worse as a result of this hardline stance, and just took another big leg lower.
From The US Treasury's blog: [10]
Taking the Threat of Default Out of the Debt Limit
On Sunday, December 2, Secretary Geithner appeared on NBC’s Meet the Press [11], CBS’ Face the Nation [12], ABC’s This Week [13], FOX News Sunday [14], and CNN’s State of the Union [15] and made the case for the Administration’s balanced approach to reducing the deficit and strengthening economic growth.
Along with this balanced plan to reduce the deficit, Secretary Geithner indicated that the Obama Administration supports extending the “McConnell Provision” regarding the debt limit -- a part of last year’s Budget Control Act:
Secretary Geithner on Meet the Press: “We made a very sensible suggestion, and let me describe what that is. What we propose to them is they extend what’s called the McConnell provision. This was a solution Senator McConnell offered last summer, which was enacted -- summer of 2011 -- which was enacted into law, supported by Republicans. And the way that works is the President would have the obligation periodically of requesting an increase in the debt limit, and then Congress would have the chance, then, to express its views on the merits of that proposal by disapproving that. And then the President would have to decide, if a bill came to his desk, about whether to veto that or sign it. Of course, he’d veto it in that context. And the virtue of that mechanism proposed by Senator McConnell, a man of impeccable conservative credentials, is to make sure that the country is not left at risk of periodic threats of default. It’s a very good idea. It was a Republican idea. And we’re suggesting they extend it.”
The McConnell Provision received broad bipartisan support last year. In fact, it was one of those rare policy proposals that received support from both the Wall Street Journal [16] and New York Times [17] editorial boards.
And for good reason. Extension of the McConnell Provision would lift the periodic threat of default from the U.S. economy and remove politics from future debt limit debates, while preserving Congress’ essential role in spending, revenue and borrowing decisions.
Under the McConnell Provision, Congress would retain its authority to disapprove any increase in the debt limit. In fact, the provision was specifically designed to permit increases in the debt limit only after both houses of Congress were given the opportunity to vote on whether to approve or disapprove any increases.
Extending the McConnell provision would not permit the executive branch to spend money or collect revenues without prior congressional approval. Indeed, the debt limit does not authorize new spending commitments; it simply allows the government to finance existing legal obligations that Congresses and presidents of both parties have approved in the past.
Background on the McConnell Provision
The Budget Control Act enacted in August of 2011 included a provision, authored by Senate Republican Leader Mitch McConnell, that provided for expedited votes in both houses of Congress on legislation to disapprove debt limit increases requested by the President. Congress could block an increase in the debt limit via enactment of the disapproval legislation. However, if disapproval legislation was not enacted, the requested debt limit increase took effect. The debt limit was increased three times pursuant to Senator McConnell’s mechanism.
How the McConnell Provision Works
A congressional debt limit disapproval process consists of the following steps:
- Once the debt subject to the statutory debt limit is within $100 billion of the limit, the President may request an increase in the debt limit by sending a written certification to Congress that the outstanding debt is within $100 billion of the debt limit, and that further borrowing is needed to meet existing commitments.
- Congress has 15 days to deny the request, through enactment of a Joint Resolution of disapproval.
- In both the House and the Senate, consideration of the Joint Resolution of disapproval is governed by expedited procedures.
- If both Chambers pass the Joint Resolution of disapproval:
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- It is sent to the President for veto or signature.
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- If the President vetoes the Joint Resolution, the Joint Resolution is returned to Congress.
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- If the President’s veto is overridden by Congress, which requires a 2/3 vote of each Chamber, then the debt limit increase request is denied.
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If a Joint Resolution of disapproval is not enacted within 15 days then the debt limit is increased pursuant to the President’s certification.
Summary
[18]