WASHINGTON » Did Congress just kill the debt ceiling?
It might look that way, given the legislative text of the deal that Congress just approved and President Barack Obama signed into law Thursday, reopening the government and allowing the Treasury to get back to financing the government’s debt.
At first glance, the "default prevention" section of the bill seemed to imply that the president would have the authority in the future to increase the country’s debt unilaterally, and that Congress could stop him only by passing a bill forbidding it.
Given that the president could veto that bill, it would take a supermajority of two-thirds of the lawmakers in both the House and the Senate to stop him from increasing the total amount of debt on the government’s books.
Some market participants interpreted the law that way, and the provision has caused widespread confusion.
"This amendment is a significant development for future debt ceiling negotiations as it will forever remove the uncertainties associated with prolonged and disruptive negotiations on this issue," Millan L. Mulraine of TD Securities said in a note to clients. "By design, the amendment makes future debt limit increases automatic, removing the specter that this issue could again be used by a minority as a bargaining chip in the future."
Well, actually no, both Republican and Democratic Senate officials said.
This procedural maneuver in question is called the "McConnell rule," as it is the brainchild of Sen. Mitch McConnell of Kentucky, the Republican leader.
Indeed, if Congress put the McConnell rule into effect permanently, it would make it impossible for a small group of lawmakers to push the country into default. But the law puts it into effect only temporarily. Starting now, the Treasury Department is allowed to issue as much debt as needed through Feb. 7. There is no specific number for debt limit.
At that point, however, everything reverts to the previous rule, which requires Congress to raise the debt limit in some way for Treasury to increase the total amount of official borrowing. Obama would lose the ability to issue debt as needed. Treasury can still employ "extraordinary measures" to keep paying its bills. Eventually, unless Congress acts, another cash squeeze would set in.
The deal explicitly includes an option for Congress to object to the president’s increasing the country’s debt. And McConnell intends to introduce such a motion, an aide said. But because it would need to pass through Congress and then override a presidential veto, it is just a symbolic gesture. (Democrats, who control the Senate, would never go along with it.)
Some political analysts have speculated that the McConnell rule might apply to next year’s debt ceiling fight, rather than the one just finished. Aides said that was a misreading of the admittedly complicated language. After Feb. 7, the Obama administration would be back to pressing Congress to raise the ceiling or suspend it for more time.
Some people have also asked whether the Treasury could issue, say, $5 trillion or $10 trillion of new debt during the time the debt ceiling was suspended. That would mean it could go for years without needing to cajole Congress to raise or suspend the limit. Such a maneuver would not increase government spending and might even allow Treasury to take advantage of today’s unusually low interest rates. But the answer is still no. The law includes specific language that prevents the Treasury from issuing debt beyond what the government is spending.
The McConnell rule makes the calendar the trigger for legislative action, rather than a dollar figure. In the past, Congress has usually raised the debt ceiling, which stands at $16.669 trillion, by a figure large enough to allow the government to operate normally for at least several more months and sometimes as much as three or four years.
While the government will operate under a different rule for the next few months, nothing in the debt law that just passed changes the fundamental situation: The government cannot borrow more than authorized by Congress, which means that the potential for default remains alive.