Debt-Limit Timing Has GOP in a Fix
Senate Republicans are crossing their fingers that the Bush administration can find a way to help them postpone an upcoming vote on raising the debt limit so they can prevent Democrats from using the issue to attack President Bush’s tax cut.
Current Treasury Department predictions indicate that the federal government could be in danger of defaulting on its debt if Congress does not raise the statutory limit by the first week of April.
Senate Majority Leader Bill Frist (R-Tenn.) also wants to complete action on the tax cut in early April. As a result of the coincidence of timing, some Republicans privately worry that Democrats will try to exploit the similarity between the debt-limit increase and the price tag of Bush’s latest tax-cut proposal.
“We’re going to tell [the White House] that there’s no way to bring up the debt limit and do the tax cut at the same time,” said a Senate GOP leadership aide.
Current estimates show that the debt limit will have to be raised by $1.3 trillion to $1.7 trillion in order to manage the federal debt into early 2005. Meanwhile, Bush’s nearly $700 billion “economic growth package” has received the most debate in Congress lately, but the $500 billion cost of making the 2001 $1.3 trillion tax cut permanent, which Bush is also pushing, would bring the total tax-cut cost to $1.2 trillion.
If the Bush administration can find a way to keep the federal government from hitting the debt limit before April 15 — when taxpayers will flood the Treasury with new revenue — Congress can pass the tax-cut proposal unencumbered the first week of April.
“If you get to April, you get to June” before you have to raise the debt limit, said the GOP leadership aide.
But Treasury Department officials said it might not be possible to stave off a Congressional vote until June because of the difficulty in predicting federal revenues and expenditures for the next month or so.
Treasury began using what one administration official described as “accounting tricks” on Feb. 20 to prevent the government from defaulting on its debt.
But the official cautioned, “We don’t have an unlimited supply of these accounting tools. … There’s a risk that our tools may be exhausted sometime in early April.”
The official noted that any “surprising expenditures” — perhaps those incurred by a war with Iraq — could speed up the process and ensure that Congress will have to act this spring.
Budget Chairman Don Nickles (R-Okla.) said in an interview that his recent conversations with Treasury Secretary John Snow jelled with that outlook.
“Financially, we’re going to have to do something, maybe before April 11,” said Nickles. “We can’t wait until June.”
If that happens, Nickles said it is entirely possible that the budget reconciliation measure, which will be designed to protect Bush’s tax cut, may also include the debt-limit increase.
That’s exactly the type of ammunition Democrats are already salivating over. Either way, they plan to use the unique timing of the votes to argue that Congressional Republicans and the White House are imperiling the economy and the nation’s economic future by borrowing money to pay for an unnecessary tax cut.
“It’s ironic that at the very time we’re increasing the debt limit, we’re decreasing revenues,” Minority Leader Thomas Daschle (D-S.D.) said in a brief interview. “We’re going to continue to make sure that the American people understand that the reason the debt limit is increasing is because of the size of the tax cut.”
Democrats are pushing what they say is a $112 billion economic stimulus package that would have less of an impact on the deficit and debt limit.
When the Bush administration asked for and got an increase in the debt limit last year, Democrats had a more difficult time making the case that Bush was frivolously spending money on tax cuts and creating historic deficit levels and debt. This year, Democrats feel as if the potential for a confluence of votes on the new tax package and raising the debt limit will virtually make the point for them.
“If we can’t make that contrast, we’re not worth our salt,” said Minority Whip Harry Reid (D-Nev.).
Finance Chairman Chuck Grassley (R-Iowa) said he expected Democrats to force multiple votes on the debt limit this year by preventing the GOP majority from passing one large debt-limit increase.
Grassley said he expected the tactic to continue “as long as Democrats need an excuse to talk about the budget deficit they created.”