Debt limit resets at higher level, budget impasse grinds on

WASHINGTON Mon May 20, 2013 8:50pm EDT

Treasury Secretary, Jack Lew, arrives at the G7 Finance Ministers meeting in Aylesbury, southern England May 10, 2013. REUTERS/Alastair Grant/Pool

Treasury Secretary, Jack Lew, arrives at the G7 Finance Ministers meeting in Aylesbury, southern England May 10, 2013.

Credit: Reuters/Alastair Grant/Pool

WASHINGTON (Reuters) - The government added $306 billion in new debt during a four-month suspension of the federal borrowing limit, the Treasury Department said on Monday, but there was no sign on Capitol Hill of any movement toward a budget compromise.

As of Friday, the last business day before the debt limit was officially reset on Sunday, the Treasury said in its daily statement that U.S. debt subject to the limit was $16.7 trillion, compared to $16.394 trillion prior to the suspension in February.

The new $16.7 trillion level effectively becomes the new debt limit, and the Treasury has begun to deploy its so-called extraordinary cash management measures to keep from exceeding that cap. Treasury Secretary Jack Lew said last week that the department could continue paying the government's bills until after September 2, while the Congressional Budget Office has said the deadline may stretch as late as November, given the recent strength of U.S. revenues.

House Republicans engineered the debt limit extension as part of a strategy to coax the Democratic-controlled Senate to pass its first budget resolution in four years. Congress would then debate each party's fiscal visions.

The Senate passed a budget reflecting Democratic priorities to preserve social safety net programs that would require the wealthy to pay nearly $1 trillion more in taxes by eliminating deductions. It contained only modest spending cuts.

The Republican plan, like those passed in previous years, includes no new revenues and relies heavily on deep cuts to social programs such as the Medicaid healthcare program for the poor and disabled, while keeping the savings from automatic spending cuts in place.

With Congress consumed by a widening scandal over the Internal Revenue Service's targeting of conservative groups for extra scrutiny, congressional aides say there have been no new developments.

House Budget Committee Chairman Paul Ryan of Wisconsin, who was the 2012 Republican vice presidential candidate, and his Democratic Senate counterpart, Patty Murray of Washington state, continue to discuss forming a conference committee.

Democrats want to start a formal, public conference to work out the differences between the two budget plans.

But Ryan wants to establish a "framework" for an agreement before starting that process and a Ryan spokesman said: "We remain in contact with Murray and her staff."

The Republicans who control the House have not yet coalesced around a strategy for approaching the debt limit. Some lawmakers last week voiced support for linking the next debt limit hike to policy goals such as tax reform or approving the Canada-to-Texas Keystone XL oil pipeline. Many say they won't vote to raise the debt cap without further action to reduce deficits.

"We've just begun the conversation with members - and, more importantly, the American people - about what will be necessary to raise the debt limit, consistent with the ‘Boehner Rule' of equal or great cuts and reforms," said Michael Steel, a spokesman for Republican House Speaker John Boehner.

Boehner, who was one of the key players in the 2011 debt limit negotiations, has said that for every dollar increase in the debt limit he wants an equal amount or more in debt reduction over 10 years.

Fearing that sharply reduced estimates of federal deficits for the next few years will promote stasis in Congress, the Campaign to Fix the Debt, a group advocating deficit reduction, launched a new ad campaign warning Washington lawmakers not to "sweep our debt problems under the rug."

"Too many of our political leaders are trying to ignore our historically large national debt, but doing nothing won't make it go away," said Maya MacGuineas, head of the Campaign to Fix the Debt.

(Reporting By David Lawder; Editing by Paul Simao)

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