Senate Republicans are considering trying to attach a bill that would cap federal spending at 20.6 percent of gross domestic product within a decade to a measure raising the nation’s legal borrowing limit, according to two party congressional officials.
Republicans are looking seriously at the proposal -- a 10- page bill known on Capitol Hill as the “CAP Act” that aims to shave $7.6 trillion from federal spending over 10 years -- as a way of pressing President Barack Obama and Democrats to accept some debt-reduction measure as part of the debt-limit vote, the officials said. They spoke on condition of anonymity because they were not authorized to publicly disclose private discussions.
A vote to raise the statutory limit on the burgeoning national debt is a must-do item in the coming months, with the Treasury Department projecting the government could bump up against the $14.3 trillion ceiling as soon as mid-May and run out of options for avoiding default by early July.
While the White House says the vote should be “clean” -- free of any legislative riders -- it has become clear in recent weeks that it will be difficult to muster enough support unless the debt-ceiling boost is accompanied by a measure that moves in some way toward reducing the debt.
Many Republicans, Democratic Senator Joe Manchin of West Virginia and independent Senator Joseph I. Lieberman of Connecticut have said that they won’t consider an increase in the debt ceiling unless Congress first acts to trim the annual budget deficit, estimated to top $1.6 trillion this year, and begins to lower long-term debt.
Something About Debt
“Obviously, we’re going to require, as a condition for raising the debt ceiling, something really important about the debt,” Senate Minority Leader Mitch McConnell, a Kentucky Republican, said April 13. He said he believes that Congress must do “something that the markets would view as significant, something the American people would view as significant, something foreign countries would view as significant.”
McConnell has been holding meetings for months to forge a consensus among Republicans about the debt issue. All 47 Republican senators have signed on to the idea of adding a balanced-budget amendment to the Constitution, though it has little chance, given the requirement of a two-thirds majority vote in both the Senate and the House and ratification by three- fourths of the states.
For all the debate about the deficit in Washington, bond market yields in the U.S. are lower now than when the government was running a budget surplus a decade ago, even though Treasury Department data show that the amount of marketable debt outstanding has risen to $9.13 trillion from $4.34 trillion in mid-2007. The yield on the benchmark 10-year note is below the average of 6.92 percent since 1980 and compares with the average of 5.48 percent in the 1998 through 2001 period, according to Bloomberg Bond Trader prices.
Ten-year yields fell 3 basis points, or .03 percentage point, to 3.47 percent as of 9:55 a.m. in London, according to Bloomberg Bond Trader prices.
The legislation under discussion would set annual federal spending caps and institute automatic across-the-board cuts if Congress failed to stay within them. A two-thirds vote by the House and the Senate would be required to override the caps.
“In essence, it’s a fiscal straitjacket, and I think the American people have seen the tremendous lack of discipline that we have here,” Senator Bob Corker, the Tennessee Republican who is co-sponsoring the measure, said at a news conference in Washington yesterday.
Senator Claire McCaskill of Missouri, the measure’s Democratic co-sponsor and the only member of her party so far backing the plan, said while she is not insisting on it as a condition of raising the debt ceiling, “doing nothing is not an option.”
‘Playing Political Games’
“There are risks -- serious and substantial risks -- for playing political games with the debt ceiling as it relates to our economy and the world economy,” said McCaskill, who served as Missouri’s state auditor before being elected to the Senate. “This is about drawing the two sides to the middle.”
Lieberman, who endorsed the measure yesterday, said his hopes for it had been bolstered during a recent lunch among moderate Democrats in which he said “everybody in the room said they were not prepared to vote for a so-called clean debt- ceiling extension.”
“They wanted something to happen that would give them and their constituents some kind of confidence that while we were increasing the debt ceiling, we were actually doing something to lower the debt,” said Lieberman, who caucuses with the Democrats.
Corker said another Democrat, whom he would not name, is planning to publicly endorse the plan in the coming days while home for Congress’ two-week recess.
The measure also has at least some measure of bipartisan backing in the House, where Corker said Democratic Representative Jim Cooper and Republican Representative John J. Duncan Jr., both of Tennessee, are supporting it.
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