Remember how close the U.S. came to defaulting last August when Democrats and Republicans couldn’t agree on a plan to raise the debt ceiling? Well, that may be nothing compared to the fireworks we might see this October.
Ohio Senator Rob Portman, a former Director of the Office of Management and Budget during Bush administration, has determined that the debt limit agreement of last year will hit its limit around October 15.
Portman has made his prediction with criticism of Obama, which raises some question if he isn’t just playing some election year politics. Nevertheless, since he has significant experience on the budget and has a reputation to uphold, his warning has to be taken with some degree of truth.
“Following the contentious debt ceiling last August, President Obama promised that he would take action to address the country’s fiscal crisis. He has failed to do that,” Portman said. “In fact, his new budget increases spending and projects that Washington will be hitting the debt ceiling again in mid-October – burning through a $2.1 trillion debt limit increase in just over 14 months.”
If the debt hits it limit around October 15, there is no way that Congress is going to approve an increase before the election. The debt would be the proverbial hot potato that no one will touch.
How this will play out is anyone’s guess. Will it be bad for Obama or the Republican nominee? It surely won’t be good for any incumbents in Congress. It might even lead to an anti-incumbent swing with Republicans taking over the Senate and Democrats retaking the House.
What is going to be critical is how the leadership in both parties handles this. If one side looks like an obstructionist, or if one side appears reasonable, the leadership of the United States might change dramatically for two or four years. It isn’t as if spending for new projects is sought. All this spending has already been approved. This is just about finding ways to pay for what has already been agreed. Can it get crazier than this?
Treasury Secretary Timothy Geithner has a slightly different take. He agrees that the debt limit will be reached this year but later in the year. Geithner said there is enough money to get past this fiscal year on September 30 and into late 2012. The election is November 6.
Whether the debt limit is reached October 15 or December 15, the threat of political stagnation is real. After the election, there is a lame duck session of Congress and possibly a lame duck President. That make a deal even less likely. However this is looked at, it isn’t pretty.