Fiscal Cliff: The Remix

House Republicans,  in an effort to thwart the effects of another debt showdown this summer, passed a bill Wednesday to protect Social Security recipients and investors in Treasury bonds if the government hits its borrowing limit. According to the Associated Press, the House Ways and Means Committee passed the bill exempting interest and principal payments on Treasury bonds from the statutory debt limit as well as interest payments to Social Security trust funds. The bill passed 22 to 14 down party lines with Republicans in favor and Democrats opposed, while the full House will take up the bill after Congress returns from next week’s vacation. However, democrats are expected to block the bill in the Senate. Republicans believe the bill could help avoid a historic default even if the debt limit does not increase due to Congress and President Obama. According to Rep. Paul Ryan, R-Wis., “The whole purpose of this bill is to take default off the table,” said Rep. Regardless of the political hysterics in Washington, we will not default.” Democrats believe the bill prioritizes payments to foreign investors over funding domestic programs such as veterans, soldiers, students and elderly and calling it “Pay China First Act.” According to AP, Rep. Joseph Crowley, D-N.Y. commented, “Where in the bill are the benefits are veterans protected? Is there language protecting Medicare payments and seniors in this bill? Do they get top billing over foreign banks? This bill will do nothing to lower our debt but it will make sure that foreign banks in Switzerland and China are paid.” In January, Congress suspended borrowing limit until May 18 however the Treasury wants to take action to delay default until late summer in August. The consequences of no debt limit increase could be another showdown over government spending and borrowing leading to a similar problem as in July of 2011 when Congress took the federal government to the brink of default and received a downgraded credit rating for the first time from major rating agencies. The issues on the table have become toxic since even leading to pettiness in last year’s congressional elections where both parties pointed out how many times their opponents voted for an increase in debt limits which use to be a routine vote according to the Associated Press.

Debt Limit Increase Approved In Senate Vote

Debt Limit Increase Approved In Senate Vote.

As the saying goes,” Why put off tomorrow, what you can do today” or the reverse in Washington. The U.S. Senate has finally voted on Thursday to pass a short term suspension of the debt limit temporarily avoiding a showdown over the nation’s borrowing limit allowing for the attention to now focus on two looming fiscal deadlines:  deep sequestration-related cuts and funding for the federal government. The legislation passed the upper chamber and allows for the debt ceiling to be raised to pay any bills the government racks up over the next 90 days. The Senate did reject amendments that would pair the debt limit with dollar for dollar spending cuts and prioritize how the bills are paid. One provision introduced by the House forces the Senate to write a budget by withholding pay if lawmakers do not pass a spending resolution. Though optimism is in the air to meet financial obligations until May 19, there is little hope fro an agreement on how to deal with $1.2 trillion of sequestration related cuts that kick in March 1. The fiscal cliff deal delayed it by two month and reduced its impact, but the consequence are still dire and unpopular among both sides. The implications include defense spending and non-defense spending i.e. community development, housing assistance, states’ education grant and federal agencies. The administration has an alternative “balanced” plan that couples spending cuts with revenue raisers and could replace the sequester, but the Republicans in Congress have said the lover chamber has already voted on a substitute bill for sequestration that the Democrats should consider.  Shortly after the measure passed today House Speaker John Boehner (R-Ohio) issued a statement reiterating the need for the Senate to pass a budget or no pay.