The Treasury Department began taking steps today to keep funding the U.S. government without breaching the nation’s debt limit, as House Republicans continue trying to find the votes to raise it.
A suspension of the U.S. debt limit, enacted by Congress in October, expires today. Treasury Secretary Jacob J. Lew has urged lawmakers to act quickly to raise the cap, saying the government’s ability to use so-called extraordinary measures to meet its obligations will run out before the end of the month.
House Republicans say they want concessions in exchange for raising the debt limit, though they’ve been unable to agree on exactly what. Business groups are encouraging lawmakers to act to raise the debt limit, while Democrats including President Barack Obama and Senate Majority Leader Harry Reid of Nevada insist it be raised without conditions.
“Any default by the federal government on its debts would cause devastating, long-lasting effects for all Americans,” the Business Roundtable, which represents major U.S. company chief executive officers, wrote in a letter to congressional leaders released today.
Taking the government “to the precipice would foster uncertainty, dampen consumer and business confidence, risk higher borrowing costs, and could have immediate consequences for hiring and investment,” wrote Randall Stephenson, chairman of AT&T Inc. (T), and Louis R. Chenevert, chairman of United Technologies Corp. (UTX)
Stephenson is president of the Business Roundtable and Chenevert leads the group’s tax and fiscal policy panel.
The Treasury Department suspended sales of its state and local government series of non-marketable securities at noon New York time. The securities, called “slugs,” are sold to states and municipalities so they can comply with U.S. tax laws and arbitrage rules when they have money to invest from their issuance of tax-exempt bonds.
Insurance against five-year Treasury notes fell to 27.5 basis points today, matching its lowest level of 2014. The value rises with the perceived risk of U.S. debt and falls if it’s deemed a safer investment. One basis point equals $1,000 annually on a contract protecting $10 million of Treasury debt.
The cost of insuring the bonds spiked almost 110 percent in the month before hitting a one-year high of 45.5 basis points on Oct. 4, 2013, as investors grew increasingly fearful of U.S. default during the 16-day partial government shutdown.
Republicans haven’t been able to find sufficient votes for at least four plans floated in the last week as conditions for raising the debt limit, including repealing an insurance provision of the Obamacare health-care law and mandating approval of the TransCanada Corp. Keystone XL pipeline.
House Majority Leader Eric Cantor’s schedule for House votes for the week starting Feb. 10 includes possible consideration of legislation related to the debt limit. No such bill has been introduced.
The House is scheduled to be in Washington for three days next week, then returns for another four days on Feb. 25 after lawmakers’ annual Presidents’ Day recess.
“There’s no reason to drag this out any longer,” Senate Budget Chairman Patty Murray, a Washington state Democrat, said in a statement today. “Republicans should accept that they’re not getting a ransom out of their brinkmanship and agree to do the right thing for our economy by allowing the United States to pay its bills on time.”
A debt limit increase without conditions, which would need a significant number of Democratic votes, remains a last-ditch option, according to three senior Republican aides who spoke earlier this week on condition of anonymity.
“We’re still looking for the pieces to this puzzle,” House Speaker John Boehner said yesterday, joking that he’d have trouble finding enough Republican votes for a debt ceiling increase even if sainthood for Mother Teresa were attached.
“We need Democratic support in order to pass it,” said Boehner, an Ohio Republican. “We’ve got broad support in our caucus, but I don’t think we have 218 votes.”
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