How The House's Unprecedented Debt Ceiling Bill Could Make The Next Round Much Easier

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Photo: Courtesy of MSNBC

Senate Majority Leader Harry Reid said today that the Senate will vote sometime this week on the House-passed bill to suspend the debt ceiling, allowing the Treasury to borrow whatever it needs to fund the government through May 18. The bill, championed by Republican House Speaker John Boehner and House Budget Chair Paul Ryan, is an unusual one with a format that is unprecedented in recent debt ceiling history. But analysts think that in some ways, the setup could actually be beneficial for future fiscal talks because it takes out much of the uncertainty leading up to the next potential fight.

The big difference between this debt-ceiling bill is that it is not technically a clean hike in the nation’s debt limit. It’s a suspension of the debt ceiling for a certain time period. On May 19, the debt limit will be raised by an amount “necessary to fund commitment incurred by the Federal Government that required payment.” The Bipartisan Policy centre estimates that number will be around $450 billion. 

Though the term “necessary to fund commitment” seems unspecific, the debt ceiling bill actually takes a lot of uncertainty out of the next debate, Loren Adler, a senior policy analyst at the Bipartisan Policy centre, told Business Insider. 

Here’s how Adler explained it would take away from the uncertainty:

  • If the Senate passes a bill soon and Obama signs it into law in timely fashion, it would give both sides much more potential wiggle room in three months. That’s because the Treasury would need to use far fewer “extraordinary measures” to prevent default this time around. The Treasury has used about $25 billion of approximately $200 billion it has to exhaust, according to the BPC.
  • Getting legislation enacted soon would prevent the Treasury from accruing more debt in sending out early-filer tax refunds in February. That debt would be pushed to the $450 billion estimate.
  • If legislation is signed into law by the end of January, Adler said, it would move back the next “X date” — the day the government will no longer be able to pay all of its bills — rather substantially to as far back as early August, at the soonest.
  • The legislation pushes back the next battle past May 15, when a $30 billion interest payment is due. 

Adler said the bottom line is this: If the bill is signed into law this week, , as expected, it could make the next round of debt-ceiling talks much easier. 

“The sooner we can pass this, the less headache it’s going to cause next time around,” Adler said. 

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