Democrats to lift debt ceiling by $1.8 trillion, fear 2010 backlash

Politico (Link) - David Rogers (December 9, 2009)

In a bold but risky year-end strategy, Democrats are preparing to raise the federal debt ceiling by as much as $1.8 trillion before New Year�s rather than have to face the issue again prior to the 2010 elections.

�We�ve incurred this debt. We have to pay our bills,� House Majority Leader Steny Hoyer told POLITICO Wednesday. And the Maryland Democrat confirmed that the anticipated increase could be as high as $1.8 trillion � nearly twice what had been assumed in last spring�s budget resolution for the 2010 fiscal year.

The leadership is betting that it�s better for the party to take its lumps now rather than risk further votes over the coming year. But the enormity of the number could create its own dynamic, much as another debt ceiling fight in 1985 gave rise to the Gramm-Rudman deficit reduction act mandating across-the-board spending cuts nearly 25 years ago.

Already in the Senate, there is growing pressure in both parties for the creation of a novel bipartisan task force empowered to force expedited votes in the next Congress on deficit reduction steps now shunned by lawmakers.

As introduced Wednesday, the legislation sets no specific targets for deficit reduction, but its 18-member task force � 16 of whom would come from Congress � is promised immense leverage to force change if they can first come together behind a plan.

�This is a defining moment,� said Senate Budget Committee Chairman Kent Conrad (D-N.D.), one of the lead sponsors, and New Hampshire Sen. Judd Gregg, the panel�s ranking Republican, is already maneuvering to try to add the legislation as an amendment to any bill tapped to carry the debt increase.

As explained by Hoyer and other Democrats, that will almost certainly be a pending $636.4 billion Pentagon appropriations bill that includes $128.3 in contingency funds for military operations in Iraq and Afghanistan.

The House leadership has held back the bill for weeks, saving it for this moment, but now appropriations clerks have been instructed to have a final package ready to go by Monday.

Leadership staff stressed that nothing was yet final in what has become a year-end negotiation between top Democrats in the House and Senate. But the Senate appears to have been the first to put the $1.8 trillion number on the table. And Hoyer�s comments are the clearest yet on the scale of the increase and the expectation that it will be part of a larger year-end legislative train pulled along by the must-pass military bill.

House Appropriations Committee Chairman Dave Obey, who is pursuing job-related measures he would also like to add, insisted that the debt issue is a �leadership call� alone. But the Wisconsin Democrat showed no sign of opposition to the strategy outlined by Hoyer.

�It is December. We don�t really have a choice,� Obey told POLITICO. �The bill�s already been run up; the credit card has already been used. When you get the bill in the mail you need to pay it.�

Though Treasury can buy itself time by moving assets around, it is already coming close to the current debt ceiling of $12.1 trillion. Last spring, the Democratic-backed budget proposed to raise this to about $13 trillion, but given the current pace of borrowing, no one now expects that will be sufficient to get through 2010.

In fact, fiscal year 2009 ended Sept. 30 with a $1.4 trillion deficit, which demanded higher-than-expected Treasury borrowing. Most of that was due to the downturn in the economy and spending commitments in place before Barack Obama took office. And as much as Republicans point to the president�s economic recovery bill last February as the culprit, only a small share of that $787 billion package was spent by Sept. 30.

The picture in 2010 is different. The administration is predicting the stimulus will hit its stride with much more spending. And there will be a steady escalation of outlays driven by back-to-back increases in 2009 and 2010 appropriations for domestic agencies.

The White House has vowed to be more deficit conscious in its forthcoming 2011 budget due out in February. But the House could vote as early as Thursday on a $446.8 billion year-end package covering more than a dozen Cabinet departments and agencies and representing a healthy 9 percent to 10 percent increase over current spending for the same accounts.

For example, transportation and housing resources would grow by 12 percent, including $2.5 billion for high-speed-rail investments on top of the $8 billion already added by the White House to the giant stimulus bill in February. A $163.5 budget for the Departments of Labor, Health and Human Services, and Education would add an additional $8.6 billion to annual spending, and Veterans Health Administration spending would grow to $45.1 billion, a $4.1 billion increase.