Debt ceiling limits have been raised and further congressional battles have been averted by legislation signed by President Barack Obama on Saturday. The legislation signed funds the government through March 2015. The President’s move takes the politically volatile issue off the electoral table in the upcoming 2014 midterm election. Such a quick move by Congress and the President stands in contrast from the prolonged showdowns which have plagued Washington.
Without an increase the country’s debt limit, the U.S. government would have defaulted on its financial obligations which would necessitate the need to forfeit some of its federally-funded programs. This would have rivaled the dismay during last year’s government shutdown that lasted 17 days in October. Some speculate that a shutdown crisis this time would be a historic event that would have triggered severe negative market fluctuations.
The President’s strategy makes for a discreet end to the political boxing match that has consumed much of congressional debate. Democrats have repeatedly sparred with the GOP over raising the country’s debt limit. However, the fight has been postponed to at least next year as the government will continue to be funded well into 2015, long after the midterm elections.
Congress gave the final approval to the increase after a closing vote in the Senate on Wednesday. Beforehand, the Republican majority in the House passed a supporting measure on Tuesday after the GOP ceased their aggressive stance against liberal economic policy. This is in stark contrast to the confrontation which the conservatives have brought to the table for similar debt limit debates against the Democrats and President Obama over the last three years.
Objections over the vote came from Tea Party favorite Ted Cruz (R-TX) who challenged the Republican establishment over fiscal conservatism. His opposition to the rank and file Republicans has sent him to the forefront of battles on fiscal policy. Although it appeared there would not be enough Republican votes to pass the debt limit increase, the GOP leadership joined the Democratic majority. Senate Majority Leader Mitch McConnell (R-KY) and John Cornyn (R-TX), both of whom are up for reelection this year, advanced the increase measure in the Senate and guaranteed its survival. The increase was passed on party lines with 55 democrats in favor of the increase and 43 Republicans opposed.
The Republican-controlled House passed the “clean” debt limit increase just a day before it was sent to the Senate; however, the passage was mainly by those from the left side of the congressional aisle. Speaker John Boehner (R) resisted motions from his caucus to use the debt ceiling as leverage against the Democrats. House conservatives wanted to use the debt ceiling passage to force concessions in regards to the president’s healthcare law or the upcoming immigration debate. Nonetheless, the House passed the maneuver 221-201 with 193 Democrats supporting the increase with 28 Republicans, including Boehner, joining them.
President Obama reacted to the Senate vote by stating that, “the full faith and credit of the United States is too important to use as leverage or a tool for extortion.” His statement is parallel to his State of the Union Address when he called for more bipartisan effort to stop political gridlock.
Since the debt limit has been raised, the Treasury Department can continue to freely borrow to fully fund the government and its obligations. Furthermore, the newly-appointed Chairman of the Federal Reserve, Janet Yellen, can continue the Fed’s tapering program since investors will be able to speculate stable markets due to Obama’s signing of the debt ceiling increase.
By: Alex Lemieux