Senate Stalls Debt-Ceiling Decision

In his first speech as president to Congress in 2001, George W. Bush challenged lawmakers “to pay down $2 trillion in debt during the next 10 years.” But five years later, Congress is now struggling with a bill not to reduce the debt but to increase it -- for the fourth time since Bush spoke those words.

If the bill is not passed by the end of the week, the government might have to renege on promised payments to bondholders or beneficiaries of federal programs, including Social Security.

The need to increase the ceiling on government debt is a particular political problem for Republicans. They control the White House and Congress, and a large and vocal segment of the party has long called for debt reduction and fiscal austerity.

Bush lays responsibility for the explosion of debt on his watch on the 2001 recession and the costs of the war on terrorism. Democrats blame Bush’s tax cuts.

No matter the reason, the numbers show that the congressionally set limit on the total national debt -- $5.95 trillion when Bush addressed Congress in 2001 -- has grown by $2.2 trillion since and all but breached the current ceiling of $8.184 trillion. That is more than $28,000 of debt for every man, woman and child in the United States.

The government has remained below the debt limit because of financial maneuvers by Treasury Secretary John W. Snow. But Snow, who postponed a trip to Africa at week’s end to deal with the debt issue, said there was nothing more he could do.

The House took action on the debt ceiling last year, approving a $781-billion increase in the government’s borrowing authority. But the Senate is delaying until the last minute in hopes that no one will be watching when it acts at the end of a long week of debating and amending its version of the 2007 budget.

“It’s embarrassing, and the party in power doesn’t want to have to vote on it,” said Robert L. Bixby, executive director of the Concord Coalition, a nonpartisan group that lobbies for balanced budgets. “But if they really wanted to avoid embarrassment, they might try running a more responsible fiscal policy.

“My assumption all along has been that the Republicans would wait until the last minute and then dare the Democrats to block them.”

By delaying, the Senate will have little choice than to accept the $781-billion increase in the debt ceiling that the House has approved.

When the Senate gets around to voting on the debt increase, probably late Thursday or Friday, the House will probably have adjourned for its weeklong St. Patrick’s Day recess.

If the version the Senate approves differs from the House increase, the House would have to act again. But it will not be in session again until March 30 -- too late, Snow said, to stave off financial chaos.

“The ‘full faith and credit’ of the United States is a unique and precious asset,” Snow told a bankers’ trade association Tuesday. “It would be unthinkable for [Congress] not to take action.”

Snow has used a variety of strategies since mid-February to stave off default on federal obligations. To reduce the government’s obligations to bondholders, the Treasury has stopped investing civil-service retirement funds in government securities.

No one would be hurt, Snow reassured Congress; when an increased debt ceiling is passed, the Treasury will reimburse the pension funds for lost interest income.

“The effect on the ... beneficiaries will be the same as if this temporary action had never taken place,” Snow said in a Feb. 16 letter to congressional leaders.

But that strategy was not enough to keep the debt from breaching the legal limit, so Snow resorted to other, even more obscure financial sleights-of-hand. Now, he said, he has no more tricks up his sleeve.

“Members of Congress ... should vote to raise the ceiling this week,” he said Tuesday.

The budget that the Senate intends to complete before turning to the debt ceiling would add an additional $684 billion to the government’s debt in fiscal year 2007, which begins Oct. 1. About $300 billion of the debt would be bought by the Social Security trust fund, which is temporarily running surpluses pending the retirement of the baby boom generation.

In the next two years the debt’s rate of increase is expected to decline somewhat. But the budget excludes the full impact of two items that have proved expensive in recent years: the costs of the war on terrorism and the revenue lost to shortening the reach of the alternative minimum tax.

Even without them, the total debt would reach $11.5 trillion at the end of 2011 -- about double the $5.8-trillion debt when Bush took office.