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IPFS News Link • Government Debt & Financing

Federal Debt Ceiling Fiasco: Beware The Ides Of March

House Republicans will do away with the Gephardt rule that automatically passed a debt limit increase as part of the budget resolution. From now on, the House will have to explicitly vote on every debt limit increase. Since many Republicans and a few Democrats have long campaigned on never voting for a debt limit increase, passing one will be very difficult indeed. With the pre-Christmas $856 b. extension of the Bush tax cuts and extended unemployment benefits, a debt limit increase will be required in March or so according to an informal CBO estimate. Speaker John Boehner (R-OH) will face a big challenge coming up with enough spending cuts or other sweeteners to pass a debt limit increase or more likely a series of short-term debt limit increases that could prove disruptive to the Treasury market, as was the case leading up to the debt limit increases of 6/28/02, 3/29/96, 10/28/90, 8/10/87, 8/21/86, 12/12/85, 11/14/85, 10/13/84, 7/6/84, and 5/25/84. The Senate (53D-47R) will probably have an easier, but still difficult time passing a debt limit increase. Looking to the 2012 election, 23 Senate Democrats will defend their seats with three rated by Charlie Cook as toss-ups and four as leaning versus only 10 Republicans up for reelection with only two rated as toss-ups and none as leaning. Some vulnerable Senate Democrats may not vote for a debt limit increase. "CUTGO" will replace of "PAYGO." The current "pay-as-you-go" limit on mandatory (entitlement) spending would be replaced with "cut-as-you go," so tax increases could not pay for increased entitlement spending. Reconciliation could not be used to increase direct spending. A point of order would be established against any bill, amendment, or conference report that raises mandatory spending by more than $5 b.