Three Days Before Default: Things Get Messy
Congress is working through Columbus Day in hope of reaching a deal on the debt ceiling before the Treasury runs out of money on Thursday.
Over the weekend, Senate Democrats dismissed a compromise proposal by Senators Susan Collins (R-ME) and Joe Manchin (D-W.Va) that would have funded the government through March at current levels, raised the debt limit through Jan. 31, delayed a tax on medical device manufacturers and established income verification for people receiving subsidies to buy health insurance.
Congressman Mike Doyle (PA-D-14) said negotiations are ongoing in the Senate and they are the “best hope” to get a bipartisan deal reached.
He said Democrats are willing to accept the delay on the medical device tax and income verification but don’t want to fund the government at the current sequestration levels for another six months.
“That’s just something that has many of us concerned because that would mean even more dramatic cuts to programs that have already been cut to the bone during this first round of sequester,” Doyle said. “So that’s the stumbling block in the Collins proposal.”
Congressman Mike Kelley (PA-R-3) said the first round of sequestration, which was cut $85 billion in 2013, was “just a very very minor dialing back” on spending.
Another round of sequestration cuts is scheduled to take effect on Jan. 15, reducing government spending by about $20 billion.
Kelley said the House has passed partial funding bills during the shutdown, but they were all shot down by the Senate and White House.
“This is just a case where ‘you know what? If I don’t get everything I want, nobody gets anything,'” Kelley said. “I think it’s absolutely shameful, but it doesn’t surprise me. We have five years of watching this administration and the way this man (President Obama) thinks. This is pretty much the way he thinks. It’s either his way or no way.”
He said the White House and Congress shouldn’t have waited this long to begin negotiations.
“I think it’s important for the country to realize that we don’t have to be doing any of this right now," Kelley said. "It could have been handled way way earlier than this.”
Meanwhile discontent for Congress is growing in America as the shutdown and debt-ceiling debate drags on. According to numbers released by Gallup last week, “18 percent of Americans are satisfied with the way the nation is being governed,” which marks the lowest government satisfaction rating in Gallup's history of asking the question.
Doyle said the partial government shutdown and beginning of the debt-ceiling debate were not about the budget, but “Obamacare.”
“Well I think it’s finally donned on Speaker Boehner and most Republicans that Democrats and the President are not going to allow Tea Party Republicans to defund the Affordable Care Act,” Doyle said. “So now the discussion has shifted to budget numbers.”
Speaking before the U.S. Senate Finance Committee last week Treasury Secretary Jack Lew said the biggest threat to the nation’s economy is “the recurrence of manufactured crises in Washington and self-inflicted wounds.”
He said worry over a possible debt default from the federal government has already caused rates to “nearly” triple on treasury bills.
Lew said a default on the debt cold cause the stock market to “tumble”, which includes retirement accounts. Under a default doctors would operate with “uncertainty” over whether they will be reimbursed by Medicare and Medicaid, and payments to Social Security, veterans’ benefits, and salaries to active military personnel would go unpaid.
In 2011 Standard & Poor's Ratings Services lowered its long-term sovereign credit rating on the U.S. from AAA to AA+ because of the federal debt and the “political settings” surrounding the last debate on the debt ceiling.
If U.S. ratings are downgraded, that could have a very negative impact on government borrowing. Back in 2011 the Congressional Budget Office estimated that, if treasury rates were pushed up just .01 percent, “the government would pay $130 billion more in interest over the next decade.”
Some members of Congress have argued that failing to raise the debt ceiling either wouldn’t be disruptive or could reign in spending; Sen. Pat Toomey (R-PA) was once one of them. But that isn’t the case because raising the debt ceiling allows the U.S. to pay off debts for what it has already spent. It doesn’t stop the government from spending.