House leaders oppose short-term debt limit hikes

WASHINGTON Tue May 3, 2011 5:45pm EDT

Speaker of the House John Boehner speaks before the unveiling of a statue of former President Gerald Ford in the Rotunda of the U.S. Capitol in Washington May 3, 2011. REUTERS/Joshua Roberts (U

Speaker of the House John Boehner speaks before the unveiling of a statue of former President Gerald Ford in the Rotunda of the U.S. Capitol in Washington May 3, 2011.

Credit: Reuters/Joshua Roberts (U

Related Topics

WASHINGTON (Reuters) - Republicans in the House of Representatives oppose a series of short-term debt limit increases, aiming instead for a one-time hike if they win deficit-reduction controls, lawmakers and aides said on Tuesday.

Unlike the temporary spending fixes lawmakers initially brokered to avert a government shutdown earlier this year, key Republicans in the House said they prefer to increase the soon-to-be-reached $14.3 trillion debt limit only once in the foreseeable future.

The increase could allow government borrowing through the November 2012 presidential and congressional elections, under one plan being weighed in Congress.

"I don't think the American people want tiny bites of the apple" with short-term debt limit increases, Representative Jeb Hensarling, a member of the House Republican leadership, told Reuters.

Republican leadership aides echoed that sentiment.

But Democratic leaders who control the Senate are looking at both short-term and longer-term options for the debt limit extension and have not yet decided how to proceed, one Democratic aide said.

Word that Republican leaders in the House oppose short-term fixes to the debt ceiling likely would be cheered by the Obama administration and Wall Street investors, who warn that a roller-coaster debate like the one earlier this year on funding the government would rattle financial markets and hurt U.S. credibility.

Some analysts have worried aloud about rising government borrowing costs if Washington stages a rollicking debate like the one that raged for months over this fiscal year's spending. Higher interest rates paid to creditors, many of them in China, Japan and the UK, could hurt the U.S. economic recovery and even President Barack Obama's 2012 re-election.

LONGER-TERM DEAL

There are several efforts underway to reduce government deficits, projected to hit $1.4 trillion this year alone. Those include around $4.4 trillion in spending cuts over a decade passed by Republicans in the House and Obama's plan to achieve $4 trillion in deficit-reduction over 12 years.

Meanwhile, a bipartisan group of six senators is crafting a long-term deficit-cutting plan as a way of also breaking the deadlock over the debt limit.

The long-term debt increase, giving the Treasury Department enough borrowing authority to carry the country through the 2012 elections, "would happen only with some sort deficit-reduction plan," the Democratic aide said, adding that a series of short-term raises would happen while Congress hashed out the longer-term debt plan.

The country will hit the legal amount it is allowed to borrow by mid-May, the Treasury Department predicts.

And with no real commitment from Congress to raise the ceiling by that time, the U.S. Treasury has been forced to start employing emergency measures to allow the country to borrow funds beyond May 16.

The measures, when coupled with higher-than-expected tax receipts, give the United States until August 2 before the nation no longer has the borrowing authority to meet its obligations, the Treasury Department warned this week. Among the emergency measures are the suspension of special securities that treasury sells to state and local governments.

Suspending those sales would allow the federal government to gain more control over borrowing.

There is no evidence yet of firm progress toward long-term deficit-reduction, which is a Republican prerequisite to any debt limit increase.

"We need to put this thing to rest," said Republican Representative Allen West, a member of the House Tea Party Caucus.

West told Reuters he was hoping for legislation that would cap federal spending at a lower level and impose a "trigger control mechanism" if deficit-reduction measures fall short.

Freshmen Republicans like West could play an important role in the House vote on debt ceiling legislation as they constitute a large voting block in that chamber.

(Editing by Philip Barbara)

FILED UNDER:

Recommended Newsletters

Reuters U.S. Top News
A quick-fix on the day's news published with Reuters videos and award-winning news photography and delivered at your choice of one of four times during the day.
Reuters Deals Today
The latest Reuters articles on M&A, IPOs, private equity, hedge funds and regulatory updates delivered to your inbox each day.
Reuters Technology Report
Your daily briefing on the latest tech developments from around the world from Reuters expert tech correspondents.