Congress fails to deal with debt ceiling
According to recent reports, we can expect the debt ceiling debate to be pushed down the road. Republicans in the House are expected to pass a bill today which would allow the United States Treasury Department to borrow funds to continue operating the government until May. The White House is expected to approve of the bill, although this deal is not what President Obama had hoped for.
Many critics, who expect the legislation to pass in both the House and the Senate, are frustrated the Republicans have once again “caved” on the debt ceiling. Republicans had threatened for the last several years not to raise the debt ceiling “unless the increase is matched by a comparable amount of spending cuts.” But this bill will not accomplish this goal. Instead it will have a provision which has been described by House Speaker John Boehner as “no budget, no pay.”
According to the bill the Treasury will have the ability to borrow “without restrictions” until May 18, 2013, at which time the debt ceiling will be restored to the current level, plus the amount the Treasury borrowed. After the May 18 deadline the Treasury may then use other measures to avoid reaching the debt ceiling for an additional two months.
The claim by Republican house leaders is that this bill will allow time for Congress to develop a budget resolution and set spending and revenue levels for the next five to ten years.
What happens if Congress fails to meet their deadline? In the only bit of good news in the announcement, Congress will have their salaries suspended until they the current Congress ends or they pass a budget resolution. If this sounds too good to be true, it is. They won’t actually lose their salaries, which would happen to most employees who fail to do their jobs, but the salaries would be held in escrow and paid at a later time when the task is completed.
Although some supporters of the plan argue that the new bills takes the focus off of default and moves it to a more constructive conversation about fiscal planning and budgeting, other financial experts contend that the debt ceiling fight was necessary and critical to the financial stability of our country.
No one surprised by Congressional Bill
Unfortunately, the decision made by the Republicans shouldn’t surprise anyone, especially with the congressman insulated from the political pressure of an election (most members are nearly two years removed from the next election). As usual, according to Peter Schiff, American investment broker, author and financial commentator, the United State Congress has chosen “political expediency over sound policy.” Schiff also voiced his concern that that no action is likely to take place until we have a real currency crisis.
Unfortunately, with the inability of the Federal Government to discuss real debt reduction the United States will remain a debt-fueled economy. We shouldn’t fool ourselves into thinking, however, that this can possibly provide sustainable economic growth. According to Schiff, the continued actions of our government “will simply permit the growth of government, the depletion of economic vitality, and ultimately the collapse of the U.S. dollar.”
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