Corporate executives are urging Congress to include a debt-limit increase as part of a solution to the fiscal cliff – the $607 billion of spending cuts and tax hikes currently slated to begin Jan. 1.
The idea behind a debt-limit increase this year is to avoid the threat of a government default. As of last week, government debt was only $154 billion away from the $16.394 trillion ceiling. The Treasury expects the ceiling to be reached by year-end but says that with special maneuvering it can avoid default until early 2013.
The business leaders’ request clashes with the desires of conservative Republican congressmen. They want to use the threat of gridlock on the debt limit to gain the biggest possible spending cuts in fiscal-cliff negotiations.
“The downside risk here is significant if we don’t include it [the debt ceiling,]” Rob Nichols, president of the Financial Services Forum,
told The Hill. “It’s very sensible to include that, so we don’t roil the global capital markets any further.”
Ken Bentsen, head of the Washington office of the Securities Industry and Financial Markets Association, agrees.
“As a practical matter, it would make sense to wrap it in,” he told The Hill. “You could move on to deal with tax reform and fiscal reform . . . and not have this looming cataclysmic event hanging over you.”
Former Federal Reserve Chairman Alan Greenspan has a comprehensive solution to the debt-ceiling issue: “Repeal it [the ceiling],” he told CNNMoney. The ceiling is an archaic 1917 rule needed back then to fund the government, Greenspan noted.
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