Yahoo Finance No virtue in reaching the debt ceiling: Holtz-Eakin
In Washington, D.C., sometimes the extraordinary begins to feel pretty ordinary.
On Monday, the Treasury Department started taking “extraordinary measures” to keep the government from defaulting on its debt limit, a figure which now exceeds $18 trillion. Those measures include stopping investments in a pension fund for federal employees and suspending the issuance of special Treasury securities used by state and local governments.
Last fall, the Federal Reserve wrapped up its extraordinary bond-buying program called Quantitative Easing. The Fed began its first round of QE purchases in November of 2008 following the financial crisis and two more followed. The central bank announced in October that the economy no longer needed the help. (But the economy still isn't strong enough for the Fed to raise interest rates.)
Related: Schiff: Fed is "bluffing," no rate hike in 2015
“It’s become routine business to do 'extraordinary measures,'” says Douglas Holtz-Eakin, president of the American Action Forum. “We’ve done extraordinary monetary policy for six years. We’re now doing extraordinary measures on the debt ceiling again. And it should be time to get back to taking care of the nuts and bolts of business without these extraordinary procedures,” says Holtz-Eakin, former director of the Congressional Budget Office who served on President George W. Bush's Council of Economic Advisors.
Of course the latest extraordinary measures-- amid the current debt ceiling debate-- are nothing new. In 2011, the Treasury took extreme steps when a group of GOP lawmakers tried to tie the issue of raising the debt ceiling to cuts in federal spending, Democrats refused to sign on and a game of chicken lasted until two days before the Treasury was set to run out of money.
In 2013, a similar showdown developed and was resolved at the 11th hour. But "resolved" in Washington often means temporarily kicking the can down the road. In February of the next year, Congress passed legislation—which President Obama signed into law -- suspending the cap on government borrowing until last Sunday. And now, with the clock ticking toward default once again, here we are-- back at "extraordinary measures."
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The Congressional Budget Office estimates that with these measures lawmakers won’t need to raise the debt ceiling until October or November. Another estimate from the Bipartisan Policy Center, estimates that the government won't run out of borrowing ability until December 31.
Senate Majority Leader Mitch McConnell (R-KY) has said Congress will not allow the government to shut down or default on the nation’s debt. McConnell, however, has hinted a move to raise the debt ceiling could be tied to legislation.
But that might not be so easy to do, especially with the 2016 election season coming up. The Republicans, Holtz-Eakin says, are faced with the issue of “governing effectively” which means getting President Obama’s signature on laws. “That leads you to a very different strategy,” he says, “You have to have things that are closer to the middle.” And that may be the big lesson in the spending bills and the debt ceiling debate this year, he says.
“The question is just how quick do they get to it,” Holtz-Eakin says.
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