Five Key Facts about the House Debt Limit Bill

By :: January 22nd, 2013

On Wednesday, the House will vote on a bill to delay the upcoming debt limit showdown. The bill includes no spending cuts, no tax increases, and no platinum coins of unusual size. Instead, it will “suspend” the debt limit through May 18 to give lawmakers time to pass a budget in each chamber. To give them extra incentive, it also includes a new twist: If they fail to pass a budget by April 15, it will withhold their pay.

Here are five things you should know about the bill.

1. The bill doesn’t just suspend the debt limit, it raises it.

Section 1(a) of the bill suspends the debt limit through May 18. You might think that the current limit would go back into effect on May 19. And it would, except for section 1(b) which increases the debt limit to reflect new debt issued between now and then.

The bill thus increases the debt limit by an amount to be determined later. That unusual structure lets lawmakers tie the debt limit increase to a specific date, rather than an amount. It also means they get to increase the debt limit, presumably by several hundred billion dollars, without having to expressly vote for such an amount.  It’s a less transparent, and therefore less painful, way to increase the debt limit.

2. Treasury can’t build up an enormous cash hoard.

In principle, Treasury could use this reprieve to build up a pile of cash before the new limit is determined on May 19. For example, Treasury could issue an extra $500 billion in debt and hold the proceeds as cash to cover deficits once the new limit is in place.

But the bill drafters already thought of that. To prevent such gaming, the bill limits the obligations that could be financed with new debt. An obligation isn’t covered “unless the issuance of such obligation was necessary to fund a commitment incurred by the Federal Government that required payment before May 19, 2013.” In short, no funny stuff.

3. Nevertheless, the bill could allow Treasury running room well beyond May 19.

We first hit the debt limit on New Year’s Eve. Since then, Treasury Secretary Geithner has raised cash by engaging in extraordinary (albeit now-familiar) measures such as stuffing IOUs into federal employee retirement accounts in place of the federal debt they own.

A big question is whether the bill would allow the Treasury Secretary to undo those extraordinary measures and reload for the next time we hit the debt limit. The folks at the Bipartisan Policy Center, who do a great job tracking the debt limit, believe that it would. If so, the bill would put off the day of debt limit reckoning well beyond May 19.

4. Because of a constitutional issue, the bill threatens to delay congressional pay, not eliminate it.

With prompting from the group No Labels, lawmakers had toyed with the idea of not paying the members of Congress if they fail to pass a budget resolution by April 15 (“No Budget, No Pay”). But that idea ran afoul of the 27th Amendment  (the weird one that was ratified in 1992 after passing Congress back in 1789). It says:

No law, varying the compensation for the services of the Senators and Representatives, shall take effect, until an election of Representatives shall have intervened.

To avoid “varying” the amount of compensation, the bill would escrow congressional pay until each chamber passes its budget or the end of the 113th Congress. In short, No Budget, No Pay Until January 2015.

5. Members of Congress don’t need to enact a budget to get paid on time.

The bill doesn’t require that lawmakers actually enact a budget. That would be a hard task, since it would require the Republican House to agree with the Democratic Senate on a budget plan.

Instead, the bill focuses on the first steps of the process, in which the House and Senate pass their own budget resolutions. If the House passes a budget, its members would get paid on schedule, and the same for the Senate (which hasn’t done a budget for several years). But there is no new penalty if the House and Senate can’t agree on a final budget.

29Comments

  1. Michael Bindner  ::  5:07 pm on January 22nd, 2013:

    With the Budget Control Act in place, why is a Senate Budget even necessary? The use of this talking point is getting quite wearisome. Also, it is usually considered bad form for one house to mess with the rules of another. I suspect some pushback.

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  6. SteveinCH  ::  9:29 am on January 23rd, 2013:

    Easy. The BCA does not meet the requirements of the 1974 budget act. The Senate can “deem” that it does so to its heart’s content but it does not by the clear text of the 1974 act.

    To give you two simple examples of why it fails the test.

    1. The 1974 act requires a concurrent resolution every year. It does not allow for multiyear resolutions. In other words, the BCA formulation cannot comply because it is a single act that the Senate is arguing covers multiple years.

    2. The 1974 act requires a four year look forward on revenues, spending by function, and deficits. The BCA also fails this test as it establishes only spending caps at an aggregated level.

    So, in other words, the BCA is not a budget resolution as set out by law.

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  9. Michael Bindner  ::  3:17 pm on January 23rd, 2013:

    The 1974 Act is, in effect, amended by the BCA.

  10. SteveinCH  ::  3:30 pm on January 23rd, 2013:

    Not textually it isn’t. That’s rather the point. For the BCA to amend the 1974 act, it would actually have to say it is doing so. Meanwhile, nobody in the House thinks it is doing so, else why pass a budget in 2012?

    The Senate wants us all to believe that because until recently, they haven’t wanted to pass a budget. Now they seem to plan to and Sen. Schumer claims that has been their plan all along. If the BCA amends the 74 act, why would Sen. Schumer say that exactly?

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