Congress tiptoes around raising debt ceiling

The last time an administration tried to raise the debt ceiling without going through Congress, it set off a political firestorm. Not so last week, when Treasury Secretary Paul O'Neill adjusted the books to keep government under the $5.95 trillion limit mandated by law.

It's a play cribbed straight from former Treasury Secretary Robert Rubin, who shifted funds from retiree accounts to avoid the debt limit during a bitter budget standoff with House Republicans in 1995 – prompting calls for his impeachment.

But this time, the Treasury move passed with barely a comment on Capitol Hill. It's a sign that, in this budget season, rules of fiscal restraint are a subject both sides of the aisle would rather forget.

"Congress has an absolute obligation to raise the debt ceiling, and will eventually have to do it. They just don't feel like voting on it," says Stan Collender, a budget expert with Fleishman-Hillard Inc., a public-relations firm.

No one expects the government to default on its obligations, which would be the consequence if the debt ceiling were broken. But the threat of that outcome has often been used to focus on issues like fiscal responsibility.

For Republicans – many of whom campaigned on reducing the size of government and the federal deficit – a vote on raising the debt ceiling is awkward. Some also worry that it could cast doubt on the $1.35 trillion Bush tax cut, or on any future cuts.

Nor is the prospect of a tussle over debt limits appealing for Democrats, many of whom have big spending proposals of their own on the line. House Democrats say they will allow a clean vote on increasing the debt ceiling only if President Bush (who advocates raising the debt ceiling) agrees to a budget summit with congressional leaders that reopens the issue of his big 10-year tax cut.

Ever since it was passed during World War I – at $11.5 billion – the national debt ceiling has stirred up controversy when it had to be raised. By World War II, the debt limit had shifted to $300 billion. During the 1980s, Congress was voting to raise the debt ceiling several times a year, as deficits (and the national debt) soared.

In response, Congress passed new rules for enforcing budgets in 1990, including caps on discretionary spending and pay-as-you-go requirements that force lawmakers to find offsets for new spending. These were renewed most recently in 1997, but are set to expire this fall. So far, no lawmakers are making a point of renewing them.

Until Sept. 11, both parties were also committed to not dipping into the Social Security surplus "lockbox" to pay the expenses of government. But once that goal was abandoned to fund a new war on terrorism, the floodgates opened both for big spenders and tax cutters alike.

"Politicians are happy to be out of the lockbox, and I think it's going to be very difficult to reimpose formal budget restraints or even an overall fiscal policy goal in this environment," says Robert Bixby, executive director of the Concord Coalition, a public interest group.

As Congress returns this week, many insiders are speculating that pressure for new spending in an election year will make it very difficult to produce a budget agreement this year.

Despite a commitment in 1996 to phase out farm subsidies, the new $74 billion farm bill that is being worked out by House and Senate conferees increases subsidies for grain, cotton, and other crops by at least 70 percent. With control of the Senate hanging on tight races in farm states like South Dakota and Iowa, even members that still support phasing out subsidies are muting their objections.

In addition, both parties are committed to some form of a prescription-drug benefit, tagged as high as $750 billion by some sponsors. And even House Republicans are already grumbling that the administration's 15 percent cut for the Army Corps of Engineers will not survive the budget process this year, since it funds so many pet projects in members' districts.

Budget analysts also note the high incidence of budget gimmicks in both the House version passed last month and (to a lesser extent) the version proposed by Senate Democrats.

The House budget includes "unspecified reductions" of $82 billion over the next five years; while Senate Democrats propose $54 billion in unspecified cuts. "But history suggests that unspecified reductions are unlikely to ever be achieved," says Robert Greenstein of the Washington-based Center on Budget and Policy Priorities.