Teh One Who Knocks
01-31-2013, 04:24 PM
Bill suspends debt limit until May 19; wards off threat of default
By Robert Schroeder, MarketWatch
http://i.imgur.com/BRxV7hx.jpg
WASHINGTON (MarketWatch) — The Senate on Thursday is on track to pass a short-term suspension of the U.S. borrowing limit, a move that will ward off the threat of default but won’t defuse coming fiscal battles.
Senate Majority Leader Harry Reid said he expects the chamber to approve the bill in a “strong, bipartisan vote” later in the day, following its passage in the House last week.
The House-passed bill would suspend the debt ceiling until May 19, allowing the country to continue paying its bills. The White House has indicated that President Barack Obama will sign the bill.
The House’s bill also requires both chambers to pass budget blueprints by mid-April, and would withhold lawmakers’ salaries until a budget resolution is approved. Read story about House passing bill.
The possibility of hitting the debt ceiling could result in U.S. gross domestic product falling by about a half-percentage point this year, Macroeconomic Advisers estimated in a note last week.
While the bill staves off hitting the debt limit, it does nothing to address Washington’s next fiscal battles, namely the automatic spending cuts known as budget sequestration and the late-March expiration of government funding. Without a new budget, the government would face a partial shutdown.
Sequestration is designed to kick in on March 1, cutting billions of dollars from defense and domestic budgets. Democrats and Republicans alike say they want to avoid the cuts, which were designed to be deep and painful — but no alternative has gained traction to date.
Economists warn of negative effects to the economy if the cuts — totaling $1.2 trillion over nine years — are allowed to go into effect. Read related item on The Tell blog.
Sequestration “is a very real risk if they go too far,” Diane Swonk, chief economist at Mesirow Financial, said on Wednesday. “There are direct costs of sequestration and collateral damage. No one knows how markets, businesses and consumers will react to brinkmanship this time around.”
While the debt-ceiling bill is expected to pass the Senate on Thursday, Republicans say they’ll use the time until May 19 to press for more spending cuts.
“If it passes, we’ll have a few more months to come up with the kind of spending reforms necessary to secure a longer extension of the debt ceiling,” said Senate Republican Leader Mitch McConnell in floor remarks on Thursday morning.
By Robert Schroeder, MarketWatch
http://i.imgur.com/BRxV7hx.jpg
WASHINGTON (MarketWatch) — The Senate on Thursday is on track to pass a short-term suspension of the U.S. borrowing limit, a move that will ward off the threat of default but won’t defuse coming fiscal battles.
Senate Majority Leader Harry Reid said he expects the chamber to approve the bill in a “strong, bipartisan vote” later in the day, following its passage in the House last week.
The House-passed bill would suspend the debt ceiling until May 19, allowing the country to continue paying its bills. The White House has indicated that President Barack Obama will sign the bill.
The House’s bill also requires both chambers to pass budget blueprints by mid-April, and would withhold lawmakers’ salaries until a budget resolution is approved. Read story about House passing bill.
The possibility of hitting the debt ceiling could result in U.S. gross domestic product falling by about a half-percentage point this year, Macroeconomic Advisers estimated in a note last week.
While the bill staves off hitting the debt limit, it does nothing to address Washington’s next fiscal battles, namely the automatic spending cuts known as budget sequestration and the late-March expiration of government funding. Without a new budget, the government would face a partial shutdown.
Sequestration is designed to kick in on March 1, cutting billions of dollars from defense and domestic budgets. Democrats and Republicans alike say they want to avoid the cuts, which were designed to be deep and painful — but no alternative has gained traction to date.
Economists warn of negative effects to the economy if the cuts — totaling $1.2 trillion over nine years — are allowed to go into effect. Read related item on The Tell blog.
Sequestration “is a very real risk if they go too far,” Diane Swonk, chief economist at Mesirow Financial, said on Wednesday. “There are direct costs of sequestration and collateral damage. No one knows how markets, businesses and consumers will react to brinkmanship this time around.”
While the debt-ceiling bill is expected to pass the Senate on Thursday, Republicans say they’ll use the time until May 19 to press for more spending cuts.
“If it passes, we’ll have a few more months to come up with the kind of spending reforms necessary to secure a longer extension of the debt ceiling,” said Senate Republican Leader Mitch McConnell in floor remarks on Thursday morning.