Debt-Ceiling Fight May Flare This Week

Billy House
National Journal

The brewing debt-ceiling showdown still looms weeks—if not months—away, but hostilities will begin flaring this week as House Republicans push action on a bill signaling no retreat from their demand for spending cuts as a condition to any ceiling hike.

Their Full Faith and Credit Act—even in the selection of its name—is carefully written to inoculate Republicans from accusations that they would be willing to put the nation at risk of default. It even includes language specifically prioritizing and protecting Social Security payments.

But in a sign of the showdown to come, Democrats say the GOP measure still entertains the idea that the U.S. will no longer pay all of its bills—to soldiers, doctors, hospitals, businesses, and others—on time and in full unless Republicans get what they want.

Other congressional activity this week includes:

  • Senate action on online-sales-tax legislation, known as the Marketplace Fairness Act, as early as Monday. The bill is expected to pass the Senate, but it will face a tougher ride in the House.
  • A House Homeland Security Committee hearing Thursday to examine the Boston bombings and their aftermath, with Boston Police Commissioner Edward Davis among the witnesses.
  • House action by Thursday on another bill, dubbed “family-friendly” by Republicans, that would allow employers to offer compensation time instead of overtime pay. But Democrats call it anything but family-friendly or appealing to women who want to spend more time with their children, because it could provide an incentive for businesses to pressure workers to choose comp time.
  • A House Oversight and Government Reform Committee hearing Wednesday into the attack last year in Benghazi, Libya, that killed four Americans.
  • The Joint Committee on Taxation's release of a report Monday afternoon that outlines the various tax-reform proposals floating around Congress.
  • The kickoff of a three-week push in the Senate Judiciary Committee to complete a broad immigration bill that President Obama has labeled his top domestic priority.

The $16.4 trillion debt limit was actually reached on Dec. 31. But that cap was suspended by Congress through May 18 with the passage in February of the No Budget, No Pay Act.

The idea was to allow Obama and Republicans and Democrats time to come up with a longer-term deal to address the nation’s fiscal ills. But while both chambers have passed their own budgets, and the White House has proposed its own, there has been little progress in reaching a deal, or even much hope for the House and Senate to go to conference and iron out their budget differences.

Despite this stalemate, the ceiling—debt stood this week at more than $16.7 trillion—will need to be increased. The Treasury Department has said it can employ “extraordinary measures” to pay bills beyond May 19, but expert projections are that the U.S. will need to raise its borrowing limit by September or October.

The Republican bill in the House this week, which is not expected to get traction in the Senate, would allow some new borrowing outside of the debt limit, but it would only allow Treasury Department payments solely for the purpose of paying principal and interest on the current debt. The bill defines “interest” in a way that allows Treasury to make the payments for Social Security benefits in full and on time.

“By requiring Treasury to issue debt to make these payments, this legislation provides an ironclad plan to avoid the risk of default going forward,” said Ways and Means Committee Chairman Dave Camp, R-Mich., in a statement. But he conceded, “Some will argue that failure to pay an obligation other than interest or principal on our debt is simply another form of default.”

However, Camp says that two major credit-rating agencies, Moody’s and Standard & Poor’s, have indicated they distinguish between failure to make a debt payment and payment on another obligation of the United States. According to those agencies, he says, it is unlikely that a failure to pay an obligation other than debt would prompt a review of the United States’ credit rating.

Even so, Democratic members of Ways and Means argue the Republican plan would still be a form of default, and they do so in a dissenting report attached to the Republican bill bearing the signature of ranking member Sander Levin of Michigan.

“The Democratic Members of the Committee strongly oppose this legislation, which is simply a plan to default on the full faith and credit of the United States,” their report says.

“This legislation would require the Department of the Treasury to pay Chinese and other foreign bondholders first, before our troops in harm’s way if they are paid at all, before the doctors and hospitals that care for our seniors on Medicare if they are paid at all, before our veterans if they are paid, and before our American small businesses if they are paid,” the Democratic report says. “Let us be clear—under this legislation, the United States would no longer pay all of its bills on time and in full, and American families would pay the price. That is reckless and indefensible.”

The Democrats go on to urge Republicans to “stop blocking” a conference on the budget so that the House and Senate can sit down on a bipartisan basis “and work to get our fiscal house in order.”


Tax-Reform Focus

Along with the debt-ceiling fight and the online-sales-tax legislation, fiscal issues in Congress this week are expected to include more focus on the prospects for tax reform. Ways and Means' Camp is dead-set on overhauling the tax code before his term expires with the 113th Congress, though he has only promised to bring a bill out of committee. Internally, House Republicans are also trying to decide if tax reform is the best bargaining chip for them to negotiate with the Democrats on raising the debt ceiling. The Senate Finance Committee is working closely with Ways and Means on tax-reform proposals.


Hydropower, Efficiency Bills

The Senate Energy and Natural Resources Committee is marking up five bipartisan bills Wednesday that would streamline regulations for hydropower projects and promote energy efficiency. The committee is expected to easily pass all of the measures.

The real battle was never in committee, though. The challenge for Chairman Ron Wyden, D-Ore., and ranking member Lisa Murkowski, R-Alaska, is to work with Senate Majority Leader Harry Reid, D-Nev., and Minority Leader Mitch McConnell, R-Ky., to get the bills to the floor under an agreement that avoids amendment fights over unrelated controversial energy issues such as the Keystone XL pipeline and Environmental Protection Agency climate regulations, which could sink the entire effort. In fact, that’s exactly what happened to energy-efficiency legislation introduced last Congress by Sens. Jeanne Shaheen, D-N.H., and Rob Portman, R-Ohio. This measure is among the bills the Energy panel is marking up Wednesday, under the premise that if at first you don’t succeed, try, try again.


Sparring Over EPA

The Senate Environment and Public Works Committee will be flexing its muscles this week with floor action expected on one measure Monday and a controversial confirmation scheduled for Thursday.

Senators are expected to begin debate Monday evening on one of the chamber’s few truly bipartisan bills, the Water Resources Development Act. This measure, which has an authorization cost of about $12 billion, provides funding for Army Corps of Engineers projects aimed at protecting communities from floods, hurricanes, and other storms. The measure also provides environmental restoration, such as beach replenishment. Senate Environment and Public Works Chairwoman Barbara Boxer, D-Calif., and ranking member David Vitter, R-La., have worked collaboratively on the legislation. Vitter didn’t even object to Boxer adding in a new title on extreme weather in the wake of Hurricane Sandy (though she was careful not to say a word about whether climate change was causing more extreme weather).

While some issues with the bill remain, including environmentalists’ objections over a new limit for project reviews, Senate staffers expect the measure to pass, likely later this week.

Meanwhile, Boxer and Vitter are expected to spar over the confirmation vote of Gina McCarthy to be EPA administrator. Vitter had asked for more time to review McCarthy’s record and receive responses from her about his concerns. But Boxer announced late last week she was moving ahead with a confirmation vote anyway. It’s scheduled for Thursday.


Regulating Pharmacies

The Senate Health, Education, Labor, and Pensions Committee is moving forward on a legislative proposal to expand the Food and Drug Administration's authority to regulate compounding pharmacies, like the Massachusetts firm responsible for the recent fungal-meningitis outbreak. A hearing Thursday will include testimony from FDA's top drug official, Dr. Janet Woodcock, and from a panel of experts on pharmaceutical policy. The House Energy and Commerce Committee is also looking at the issue, though HELP looks likely to take the lead on writing legislation.

On Tuesday, the Ways and Means Health Subcommittee will be hearing testimony on changes to the model Medicare uses to pay physicians. The discussion comes at a time of heightened interest on Capitol Hill in repealing a flawed payment formula and passing a permanent "doc fix" this year.

Rep. Bill Cassidy, R-La., is expected to release an updated bill that would convert Medicaid payments from the current system of matching all state expenditures to one that would pay states a flat fee for each beneficiary in the program. The idea, often called per-capita caps, has not been the standard GOP approach to Medicaid reform—stricter global block grants have dominated conversation for the last few years. But the per-capita concept got a little boost last week, when Senate Finance Committee ranking member Orrin Hatch, R-Utah, and House Energy and Commerce Chairman Fred Upton, R-Mich., released a detailed white paper endorsing the approach.


Amendment Maze

The Senate Judiciary Committee will begin officially marking up the broad immigration bill on Thursday and will continue with several markups per week thereafter until the bill is completed. Bill sponsors expect dozens of amendments, and it will be incumbent upon the proponents to wade through those that offer constructive changes to the measure and those designed to kill it.

The opponents of the legislation on the committee are loud—Sen. Jeff Sessions, R-Ala., is probably the loudest—but they are also in the minority. If the bill stays largely intact throughout the amendment process, the panel is likely to pass it, moving it to the Senate floor after the Memorial Day recess.

Reid, meanwhile, has made no bones about the fact that he will make sure the bill gets to the floor regardless of what happens in committee. Last week, he gave a speech in Las Vegas promising to do "everything in my power" to get immigration over the finish line in the Senate.

The Judiciary Committee markups won't be the only action on immigration this week. The Senate Homeland Security Committee will hold a hearing Tuesday with several officials from the Department of Homeland Security to talk about the border-security elements of the immigration bill. Their testimony will be critical to assuaging Republicans who are skeptical that sponsors really mean it when they say they want to shore up immigration enforcement.

In the House, Judiciary Committee Republicans have introduced two smaller pieces of the immigration matrix—one on electronic verification of new hires and one on agriculture workers—as part of their campaign to analyze the system in a step-by-step manner.


Setting Priorities

As Congress revs back into action after recess, so do the committees. On Wednesday is the House Armed Services Committee's two-hour slot for members of Congress to voice their priorities they would like to see reflected in the defense authorization bill the committee is drafting. That same day, the Strategic Forces Subcommittee will hear from a slew of witnesses outlining the Obama administration's needs for missile-defense funding for fiscal 2014, and on Thursday, another set of witnesses will testify before the subpanel about the administration's request for atomic-energy defense activities funding and nuclear forces. The Senate Armed Services Committee will hear from Air Force Secretary Michael Donley and his chief of staff Gen. Mark Welsh on Tuesday about their budget priorities, and subcommittees will hold oversight hearings this week on ballistic-missile defense policies and Navy shipbuilding programs.


Celebrating Alliance

Obama this week will mix foreign policy in one of the tensest parts of the world with events designed to show his concern over the domestic economy. On Tuesday, he will host South Korean President Park Geun-hye to mark the 60th anniversary of the American alliance with Seoul. But much of their time will be spent talking about continuing provocations from North Korea. Then, on Thursday, the president will visit one of the states where he's never done particularly well—Texas. In Austin, he will hold events focused on the economy.