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Thursday October 2, 2014

Washington News

Washington Hotline

House and Senate Strive to Avoid Shutdown

As of publication time on Friday evening, the House and Senate had both passed short-term continuing resolutions. The House bill continues funding for the federal government from October 1 to December 15, 2013. The House bill reflects the desires of a number of House Republicans to halt funding for the Affordable Care Act. This provision is opposed by the White House and the Senate.

On Friday afternoon, the Senate concluded three days of debate by passing a continuing resolution on a party line vote of 54-44. The Senate continuing resolution also funds the government until December 15. However, the Senate included an amendment that restores funding for the Affordable Care Act.

House Republicans plan to meet on Saturday to discuss further plans. Speaker Boehner continues to state that he does not expect a shutdown of the federal government. However, some members of his caucus oppose implementation of the Affordable Care Act.

The federal government starts a new fiscal year on Tuesday, October 1. A compromise or agreement on the continuing resolution will be needed by Tuesday to continue government services. If there were to be a shutdown of the federal government, the military and many essential government services will continue to operate.

Editor's Note: There are several reasons why Speaker Boehner predicts that there will not be a shutdown. The two issues facing the Congress are a continuing resolution and the increase of the federal debt limit. It is essential to address the debt limit question by the middle of October. A government shutdown would greatly interfere with efforts by both parties to resolve this debt limit increase. Therefore, a government shutdown is not an attractive prospect for any of the parties involved.

CBO Predicts Reaching Debt Limit on October 22


The United States has reached the authorized federal debt limit of $16.699 trillion. Approximately $11.9 trillion of that debt is held by the U.S. public and foreign investors. Over $4.8 trillion of debt is held by various government organizations.

The U.S. Department of Treasury is borrowing internally from retirement funds to continue government operations. However, the Congressional Budget Office now predicts that Treasury will run out of internal borrowing capability by October 22.

Treasury Secretary Jacob Lew sent a letter to Speaker Boehner on September 25 to explain the current state of affairs. Lew noted that the "extraordinary measures we are employing to preserve borrowing capacity would be exhausted in the middle of October. We estimated that, at that point, we would have approximately $50 billion to fund the government – an amount insufficient to cover net expenses for a meaningful period of time."

Lew also emphasized that the President "remains willing to negotiate over the future direction of fiscal policy, but he will not negotiate over whether the United States will pay its bills for past commitments."

Speaker Boehner observed that there is a new report from the Joint Economic Committee. This Congressional organization states, "The fact is, however, that passage of this legislation will lead to increased economic output, higher revenue for the federal government, and less federal borrowing." The JEC is referring to an analysis of the "Spending Control and Economic Growth Act."

Speaker Boehner welcomed the report and noted, "To tackle our debt and put us on a path to a balanced budget, we need to both cut spending and strengthen our economy. We have long said that economic reforms must be part of the solution to our imminent debt crises, and this report confirms that our pro-growth policies will not only create jobs, but also produce significant deficit reduction."

Speaker Boehner and House Republicans are preparing a bill that is expected to authorize a one year increase in the federal debt limit. It is likely to include three additional sections. First, in addition to the sequestration reductions, there may be additional limits on spending. Second, House Republicans favor a repeal of the 2.3% excise tax on medical devices. Third, House Ways and Means Chair Dave Camp (R-MI) has requested a "fast track" process that will facilitate both individual and corporate tax reform.

At a September 26 hearing before the House Budget Committee, Congressional Budget Office Director Douglas W. Elmendorf was asked by Ranking Member Chris Van Hollen (D-MD) what the impact would be of a government default. Elmendorf replied, "Defaulting on any obligation of the U.S. government would be a dangerous gamble."

Editor's Note: If the government does avoid a shutdown through passage of the continuing resolution by Tuesday, the focus will immediately turn to this discussion of the debt limit. While the President has stated he will not negotiate on the debt limit, it now is apparent that the bill to raise the debt limit will be passed by the House and sent to the Senate. A House-Senate compromise is likely to occur only in the last few days before October 22.

Published September 27, 2013
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