Bloomberg News

Debt Limit Be Damned as U.S. Content With Talkless Summer: Taxes

July 03, 2013

Representative Tom Cole

Representative Tom Cole said, “To me, that’s a more pressing issue, because that has deadlines and real consequences if you don’t act. If you don’t pass an immigration bill, there may or may not be a political consequence to that in 2014.” Photographer: Brett Deering/Getty Images

Congress is increasingly unlikely to start talks on getting a budget deal and forestalling a debt limit impasse before the next five-week break in August.

Several factors are at play: brightening deficit forecasts from the nonpartisan Congressional Budget Office, a crowded July calendar dominated by potential action on immigration and the lack of an obvious starting point for bargaining between two sides that remain far apart, Bloomberg BNA reported.

With the Treasury expected to exhaust its borrowing capacity between October to December, officials had expected a fall showdown. By waiting until after the August recess to lay out even opening positions on taxes and spending, lawmakers and the White House may be setting the stage for a sprint in the last few months of 2013.

“It seems to be fading,” said Representative Tom Cole, a Republican from Oklahoma. “I have not heard as much about it because there seems to be less and less pressure, because the debt ceiling keeps drifting further back. So I think that has reduced the pressure.”

Cole previously said he wanted House Republicans to agree on a bill to be voted on before the August recess, saying that may give them a leg up politically by being able to tell voters back home they had put forward a solution. Instead, an overhaul of the nation’s immigration law may take up much of the House’s efforts in July. A special party conference has been set by House Republicans for July 10 to discuss immigration.

Real Consequences

The upcoming deadlines later in the year -- Sept. 30 for appropriations bills for fiscal 2014 and the debt ceiling soon after -- mean priorities perhaps should be reversed, Cole said.

“To me, that’s a more pressing issue, because that has deadlines and real consequences if you don’t act,” Cole said. “If you don’t pass an immigration bill, there may or may not be a political consequence to that in 2014.”

In his May memo to House Republicans, Majority Leader Eric Cantor listed several priorities in addition to “the expected discussion and actions on the debt limit.” In his memo outlining June’s floor agenda, the Virginia Republican changed the phrasing to “we will also continue our focus on how to deal with our broken immigration system as well as the debt limit.”

In the Senate, the outlook isn’t much brighter. Democrats continue to press their attack that Republicans are uninterested in negotiating a budget in a conference committee, even after criticizing Democrats for not taking up a budget plan for three years until 2013.

“It’s extremely important that we proceed forward to find a way to replace sequestration and deal with the budget deal,” said Senator Patty Murray, the Washington Democrat who runs the Senate Budget Committee. “And we can’t deal with that until they allow us to go conference and I’m hopeful that they’ll do that.”

Republicans want a pre-conference agreement on the scope of a House-Senate deal before a conference committee is named.

Informal Talks

The lone bright spot may be in talks between an informal group of Republicans and White House officials. Those so far appear to have been limited to looking for a common definition of issue -- over how long a time frame a deal should stretch, for example -- and not details of specific policies.

One of the senators in those talks didn’t sound like he expected much in July.

“The problem’s not going to go away,” said Senator Ron Johnson, a Wisconsin Republican. “There’s goodwill residing on both sides if they want to fix the problem, so we’ve got to keep talking. We continue to talk and look at different figures.”

Ratings Concern

In response to lower-than-expected deficit projections and stronger revenue from a growing economy, ratings companies signaled an easing concern on the government’s creditworthiness.

In 2011, Standard & Poor’s took the U.S. rating down from AAA to AA+, while Fitch and Moody’s Investors Service maintained the top rating and put the U.S. outlook on a negative credit watch, signaling the next move was likely a downgrade. On June 28, Fitch affirmed its rating and outlook.

Fitch cited “continuing uncertainty over the prospect for additional deficit-reduction measures,” near-term risks as federal appropriations authority expires Sept. 30 and “in particular a timely increase in the debt limit.”

Even if nothing reached the floor in July, the Treasury may provide additional information on how the autumn will shape up at a press conference July 31 that could allow officials to update a forecast that it will not run out of borrowing capacity “until after Labor Day.” Private sector estimates have put the date between late October and early December.

Cole said the lack of action is the fault of both the White House, which insists that no conditions being tied to a debt ceiling increase, and Congress.

“It usually acts at the very last minute,” Cole said. “The last minute’s been pushed back so, oh my gosh, we have all this extra time. Let’s avoid the hard work.”

To contact the editor responsible for this story: Cesca Antonelli at fantonelli@bloomberg.net


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