The Obama administration says the federal government has nearly reached its borrowing limit — again.
Treasury officials said Tuesday that the White House plans to request another $1.2 trillion in borrowing authority Friday. The increase is necessary, they say, because the government will be within $100 billion of its current limit by then.
In the past, such a request would be routine. But this one follows a summer of intense partisan debate over the nation’s record debt, which has yet to end despite a last-minute deal reached in August that averted a potential default.
The increase would boost the debt limit to $16.4 trillion. Congress and the Obama administration agreed to raise it to that level in three steps as part of the August deal. Officials say that should be enough to allow the government to keep borrowing until the end of 2012, or just after the presidential election.
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Congress can reject the request, although Obama can veto their objection. If Congress doesn’t act by Jan. 14, the increase will take place automatically.
The debt limit is the amount the government can borrow to finance its operations. It has soared because the government has run record deficits over the past decade.
The borrowed money has helped pay for two wars, stimulate the nation’s economy after the worst recession since the Great Depression and finance broad tax cuts initiated during the Bush administration.
The enormity of the debt has also stoked a debate in Congress over spending and taxes. Polls show growing voter anger with the inability of both parties to reach solutions to the country’s budget problems.
In August, Congress and the administration agreed to raise the borrowing limit by $2.1 trillion in three steps. The deal was reached hours before a potential default on the nation’s debt and only after the parties also agreed to cut more than $2 trillion from the deficit over the next 10 years.
Three days after the agreement was signed into law, credit rating agency Standard & Poor’s downgraded long-term U.S. debt. The difficulty Congress and the White House had in reaching agreement was a key reason for the downgrade, S&P said.
The parties remain at odds over how to reduce the deficit. In November, a bipartisan panel failed to meet a deadline to agree on $1.2 trillion of the cuts. That means automatic cuts of that amount will begin in January 2013 — a condition included in last summer’s deal.
Republicans want to modify the timetable for the automatic cuts, largely because it includes steep cuts to the nation’s defense budget.
Congress agreed to raise the debt limit by $400 billion in August and by another $500 billion in September.
House Republicans voted against the second increase. But they failed to block it because the Senate approved it. The increases are scheduled to take effect unless both chambers vote against them.
Source: The Associated Press