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Plan to Suspend Debt Limit Means Debt Would Rise to $17.8 Trillion

Posted By Romina Boccia On September 25, 2013 @ 11:59 am In Capitol Hill,Economics,Front Page | Comments Disabled

Win McNamee/Pool/Sipa USA/Newscom [1]

Win McNamee/Pool/Sipa USA/Newscom

Treasury Secretary Jack Lew announced [2] a new debt ceiling deadline today, urging congressional lawmakers and the President to come to an agreement concerning the nation’s borrowing authority by October 17. Republicans are proposing a $1.1 trillion increase in the debt limit by suspending the cap through December 2014. The big question is: Will lawmakers take control of the key drivers of soaring spending and debt as part of an increase?

Recent news reports suggest the answer is largely no. According to Bloomberg [3]:

The House Republican plan would suspend the debt cap until Dec. 31, 2014, according to a proposal distributed by party leaders to Republican members and obtained by Bloomberg News. House Republicans said it is a plan that would save at least $256 billion from budget revisions and changes to entitlement programs.

The $256 billion in savings, especially if some of the savings come from important changes to mandatory programs, is a start. But in the big picture, the proposal is woefully inadequate. Republicans have all but given up on the Boehner rule [4], requiring a dollar in cuts or reforms for a dollar increase in the debt limit. They are already $300 billion behind, and this latest proposal would put them $1.1 trillion deeper in the hole.

BL-debt-limit-suspended-2013 [5]

Congress and the President last suspended the debt ceiling from February 4, 2013, through May 18, 2013, adding $300 billion to the national debt in less than four months. Their only request was that the Senate produce a budget for the first time in four years, which it did. No savings were accomplished. Suspending the debt limit through December 31, 2014, would add an approximate $1.1 trillion [6] to the debt, for a total increase in the debt ceiling of $1.4 trillion in less than two years.

A lot is at stake this fall. Recent projections by the Congressional Budget Office (CBO) show that publicly held debt, which makes up 60 percent [7] of the debt subject to the limit, could reach 100 percent of gross domestic product as soon as 2028 [8]. At such high levels, debt poses serious risks for economic growth [9]. As Heritage economist Salim Furth explains [10]:

The CBO’s sobering numbers should motivate Congress to pass serious entitlement reform now—while it can still be done through gradual reforms and not Greek-style austerity.

Congress should implement spending cuts and entitlement reforms before—or as part of—an increase in the debt ceiling. Lawmakers still have time to put forth a plan that puts the budget on a path to balance and avoids a debt crisis today and in the future [11]. The clock is ticking.

Article printed from The Foundry: Conservative Policy News from The Heritage Foundation: http://blog.heritage.org

URL to article: http://blog.heritage.org/2013/09/25/plan-to-suspend-debt-limit-means-debt-would-rise-to-17-8-trillion/

URLs in this post:

[1] Image: http://blog.heritage.org/wp-content/uploads/JackLew.jpg

[2] announced: http://www.treasury.gov/Documents/Debt%20Limit%2020130925%20Boehner.pdf

[3] Bloomberg: http://www.bloomberg.com/news/2013-09-20/ryan-says-republicans-pairing-debt-cap-suspension-with-cuts-1-.html

[4] given up on the Boehner rule: http://blogs.rollcall.com/218/boehner-rule-on-life-support/

[5] Image: http://blog.heritage.org/wp-content/uploads/BL-debt-limit-suspended-2013.jpg

[6] an approximate $1.1 trillion: http://bipartisanpolicy.org/library/staff-paper/debt-limit

[7] 60 percent: http://www.heritage.org/multimedia/infographic/2013/08/federalspendingbynumbers2013/page-5-chart-1

[8] 100 percent of gross domestic product as soon as 2028: http://blog.heritage.org/wp-content/uploads/BL-LTBO-2013.jpg

[9] serious risks for economic growth: http://www.heritage.org/research/reports/2013/02/how-a-high-national-debt-impacts-the-economy

[10] explains: http://blog.heritage.org/2013/09/17/dont-hit-snooze-on-the-debt/

[11] avoids a debt crisis today and in the future: http://www.heritage.org/research/reports/2013/09/debt-limit-options-and-the-way-forward

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