La. delegation fails to agree on how to deal with debt ceiling
WASHINGTON — The Louisiana congressional delegation disagreed Tuesday on how to end the partial government shutdown and the threat of a government default unless the debt ceiling is increased later this month.
As the shutdown and debt ceiling issues merge, lawmakers said the focus is shifting away from the GOP just asking for changes to the Affordable Care Act health care law, and now includes pushes for debt reduction along with entitlement “reforms.”
LSU and Tulane University economists say a failure to increase the federal debt ceiling soon could create another recession, severe stock market dips and long-term harm to the nation’s credit and economic stability.
The debt limit is the artificial ceiling that Congress places on the U.S. Treasury in terms of how much debt it can issue. Raising the debt ceiling allows the federal government to acquire enough money to pay all its bills.
The debt limit would need to be raised by Oct. 17 for the federal government to avoid defaulting on some of its debts.
A debt ceiling increase has occurred under nearly every president, including four times thus far under President Barack Obama and 18 times under President Ronald Reagan.
Since the weekend, some Republican congressmen in interviews about resolving the government shutdown have linked raising the debt ceiling with defunding or postponing full implementation of the Affordable Care Act, President Barack Obama’s signature health care revamp.
“It’s moving onto something much bigger than Obamacare,” Rep. Charles Boustany, R-Lafayette, said Tuesday.
“We’re talking about the real drivers of the debt of the United States — the deplorable fiscal condition we find ourselves in.”
Boustany said, “Nobody in his right mind wants to allow a default on the full faith and credit of the United States. Period. ... But, at the same time, we need to get to some kind of agreement on how to deal with entitlement reforms.”
Rep. John Fleming, R-Minden, said Tuesday that he is “standing firm” in his opposition to the Affordable Care Act and behind the push to defund or delay it. Fleming has called the health care law the “most dangerous piece of legislation ever passed in Congress.”
Louisiana Democrats said House Republicans must vote to open the government, increase the debt ceiling and end what they call the “hostage” situation. Then, Democrats said, they would work on a “grand bargain” budget compromise.
Sen. Mary Landrieu, D-La., agreed with the president and Democratic Senate leadership that House Republicans must first get the nation out of the manufactured crisis that she calls the “tea party shutdown.”
“We’ll continue to compromise where we can but without the threat of a government shutdown or the wrecking of our economy,” Landrieu said.
“The small group of about 80 Republicans in the House — a minority in the party and a minority in the House — have put a gun to the head of every federal employee and now every business in America.”
The technical debt limit of more than $16 trillion was hit in May but the U.S. Treasury has used so-called “extraordinary measures” to pay its bills since.
The Treasury set Oct. 17 as the estimated date when the government would no longer have enough revenue to continue to pay all of its bills.
When the government approached a default in 2011 over another sharp partisan divide, the stock market suffered, the nation had its first downgraded credit rating and borrowing costs rose.
Tulane University economist Steven Sheffrin said he is “optimistic” Congress will ultimately work out some agreement and avoid the worst economic effects. But messing with the Treasury is like messing with the “plumbing of the financial system.”
“There’s going to be more anxiety,” Sheffrin said. “The markets are reacting already. The last couple of days the markets are down.”
Oct. 17 is not necessarily a magic date when everything will go badly at once, Sheffrin said, but no one can be sure exactly what will occur.
Even if the worst effects are avoided, he said, consumer confidence could suffer and “it might create this residual risk in the economy.”
LSU economist James A. Richardson first criticized the existence of the “very, very unnecessary” debt limit that Congress placed upon itself. Not increasing the ceiling could lead to “all sorts of possibilities” in addition to a “very volatile” stock market.
“It creates a lot of uncertainty. It creates a lot of insecurity,” Richardson said. “It creates a lot of people saying, ‘We can’t buy U.S. bonds anymore’.”
The U.S. dollar could be depreciated and hurt the global economy, he said. Republicans “put themselves into a corner” and now they need a way out, he added.
Dominik Knoll, who is the CEO of the World Trade Center in New Orleans and a member of the Louisiana chapter of the Campaign to Fix the Debt, said he is concerned the shutdown is beginning to affect more the importing and exporting industries in Louisiana with fewer U.S. customs employees at work.
Knoll said it would be an added “catastrophe” if the debt ceiling is not lifted and businesses and individuals are left to suffer with “very significant” stock market declines.
“Tax reform and debt reduction” are critically important issues, he added, but not by “playing the game” and putting the economy and government at risk.
“You can disagree on certain things, but you have to be clear that a central funding system for the government … is your No. 1 priority,” Knoll said.
But Scalise argued, “Every president has negotiated on the debt ceiling.”
Democrats should take up the bills passed by the House to open parts of the government that they agree upon in the interim, he said.