–Treasury’s Estimates Appear To Compel Hill Action Before August Break
–Tsy’s Geithner Urges Hill ‘Strongly Against Delaying Action’
–Senate’s Gang of Six Tries To Nail Down Deficit Reduction Plan
–Senate Finance Panel To Explore Budget Enforcement Tools Wednesday

By John Shaw

WASHINGTON (MNI) – As is often the case in the arcane and
acrimonious world of budget politics, the U.S. Treasury’s new deadline
for increasing the statutory debt ceiling provides policymakers both a
huge opportunity and a large risk.

The opportunity is that it gives Congress and the White House a
little more time to develop a legislative package to accompany a debt
ceiling increase.

The risk is that the three additional weeks before the U.S. comes
up against the Treasury’s hard deadline might lessen the sense of
urgency that many on Capitol Hill feel regarding the need to develop a
fiscal plan.

Monday, Treasury Secretary Timothy Geithner sent a letter to House
Speaker John Boehner saying the U.S. will reach the $14.3 trillion debt
ceiling on May 16, but that cash management juggling will push the hard
deadline for increasing the debt ceiling limit to August 2.

“While this updated estimate in theory gives Congress additional
time to complete work on increasing the debt limit, I caution strongly
against delaying action,” Geithner said in his letter.

The Treasury secretary said delays in increasing the debt ceiling
could hamper the U.S.’s fledgling recovery. “Delaying action risks a
loss of confidence and accompanying negative economic effects,” Geithner
said.

In Geithner’s previous debt ceiling update letter to Senate
Majority Leader Harry Reid in April, he gave July 8 as the deadline.

Budget experts agree that these three additional weeks could
provide an invaluable opportunity for lawmakers and the administration
to agree on a deficit reduction framework that will be needed to pass
the debt ceiling increase.

Congressional Republican leaders have made it clear that there will
be no clean debt ceiling bill this summer.

House Speaker John Boehner, in his concluding comments on the House
Republican fiscal year 2012 budget in late April, repeated his vow that
the House will not approve a debt ceiling increase unless it is linked
to “serious spending cuts and real budget reforms.”

Budget experts say there appears to be a growing consensus on the
political necessity of linking a debt ceiling increase with deficit
reduction efforts, but there is still no agreement on how specific or
detailed this deficit reduction package must be.

“This new deadline gives people a little more time, but it doesn’t
change the overall picture,” says Bob Bixby, executive director of the
Concord Coalition.

“I think there is a growing consensus that you will only be able to
pass a debt limit bill if you link it to legislation that has some kind
of overall goal — probably a debt to GDP limit — and a trigger to
reach the goal. But the fundamental question still is whether revenues
will be part of the trigger,” he said.

Bixby was referring to the ongoing debate about whether any budget
enforcement plan would mandate both spending cuts and revenue increases
to meet deficit reduction targets.

The Senate Finance Committee is holding a hearing Wednesday to
explore this issue and other possible budget enforcement tools.

A bipartisan group of six senators continues to work on deficit
reduction ideas and a framework for implementing these goals. The
leaders of the so-called Gang of Six have said they would like to reach
an agreement on a fiscal package in the very near future.

Senate Budget Committee Chairman Kent Conrad, who is a member of
this group, has said a comprehensive package will be needed to pass a
debt ceiling increase this summer.

Conrad is briefing Senate Democrats Tuesday afternoon on his work
on fiscal issues.

** Market News International Washington Bureau: (202) 371-2121 **

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