WASHINGTON (Reuters) - President Barack Obama’s goal of winning a big enough increase in the U.S. debt limit to get him through the November 2012 election could be thwarted by his own job-creation proposal, budget experts said on Monday.
The $447 billion in new spending Obama wants to juice up a weak U.S. economy would have to be spent quickly if it is to be effective. That would immediately pile more debt onto annual budget deficits of over $1 trillion, even though the president has promised to pay for his program in full.
The problem is that he proposes paying for it over a much longer period. It would be a decade before the Treasury Department would collect enough additional revenues to recoup the stimulus money being spent.
“The irony of all this is that ... they may have to confront it (raising the debt limit) again soon because the deficit might be a great deal higher than we were anticipating,” said Robert Bixby, executive director of the Concord Coalition, a nonpartisan group pushing fiscal reforms.
The irony Bixby referred to is this:
During the bitter fight this summer over raising the U.S. debt ceiling, Obama held out for one major provision -- enough of a debt limit increase, at least $2.1 trillion, to keep Treasury Department borrowing humming along until after the November 2012 elections.
Currently, the federal government is borrowing an estimated $125 billion a month, or about $1.875 trillion between August, 2011 and November, 2012.
But with signs that the U.S. economy is slowing from previous projections, some congressional aides already were privately worrying that the hard-fought debt limit increase would not be enough to see the country through to 2013.
An additional $447 billion in spending could put borrowing over the top, budget specialists said.
The Obama administration disagreed.
“We don’t foresee a need to increase the debt limit before December 2012 under current law or under the American Jobs Act,” Treasury spokeswoman Colleen Murray said.
In its most recent outlook, the Obama administration forecast this year’s economic growth to be 1.7 percent, down from its February estimate of 2.7 percent.
Lou Crandall, chief economist at Wrightson ICAP, which analyzes Treasury’s financing trends, told Reuters, “It’s probably a close call that could go either way” on whether a pre-election debt limit hike will be necessary.
“It certainly increases the odds that the Treasury would have to resort to evasive maneuvers before the election.”
The Treasury Department was forced to use extraordinary funding measures while Congress and the White House negotiated the debt ceiling deal.
Republicans in Congress are criticizing major portions of Obama’s jobs bill and his proposals for paying for it. That means enough of the $447 billion plan could end up on the cutting room floor. That could reduce the pressure for another debt limit increase.
Bixby and William Hoagland, a former high-ranking Republican Senate aide who specialized in budget issues, both speculated that Congress could take other steps to avoid an election year debt limit debate.
They said the “super committee” charged with finding at least $1.2 trillion in new government savings over the next 10 years could insert another debt limit increase into whatever deal it reaches by the end of this November.
“I‘m sure there have been some discussions under the radar screen on that. It would really be an issue they’d have to confront,” Bixby said.
Additional reporting by Donna Smith; Editing by Cynthia Osterman