The White House push for a debt limit hike got some ammunition Friday from the chief economist for the Senate Budget Committee, who warned failure to increase the limit soon could cause interest rates to rise on newly issued federal debt.
In a budget bulletin, economist William Beach, who formerly worked at the Heritage Foundation, warns the nation risks higher borrowing costs if it even gets close to exhausting the extraordinary measures used to avoid hitting the debt limit, now pegged by Treasury Secretary Jacob J. Lew as occurring on or about Nov. 5 , about a month earlier than expected. The new date has the effect of making it a must-do item for outgoing Speaker John A. Boehner, R-Ohio, as he goes about cleaning up a "dirty barn" for his successor. Options for Boehner include passing a straight-up debt limit hike, attaching it to a must-pass deal on transportation due by the end of the month, or some other combination. Tying it to anything opposed by President Barack Obama risks a default crisis given that Obama has repeatedly warned he will not pay a ransom again after agreeing to hand Boehner north of $2 trillion in spending cuts for a debt limit hike in 2011.