A budget deal worked out by congressional negotiators and the White House would “suspend” the federal debt ceiling until March 2017, effectively removing it as a factor for the rest of Barack Obama’s presidency and authorizing billions or trillions of dollars in new debt.
A summary of the budget agreement indicates that it would suspend the current debt limit of $18.4 trillion, which has been binding since March. The limit would be reinstated on March 15, 2017, two months after the next president’s inauguration. It would become binding at whatever level the debt had risen to at that point.
Estimates for how much new debt would be incurred in the interim were immediately unavailable. For reference, the Congressional Budget Office projects that the federal government will run a $414 billion deficit over fiscal 2016.
The budget agreement being contemplated would not be the first time that congressional Republicans and the Obama White House have agreed to suspend the debt ceiling, rather than raise it to a specified number.
In February 2014, Congress passed a “clean” debt ceiling suspension, without requiring major spending or policy changes, with the federal debt at $17.2 trillion.
When the suspension ended, in March, the federal debt had risen to more than $18.4 trillion.
Since March, Treasury Secretary Jack Lew has used accounting measures to free up borrowing authority to pay the government’s bills. He has warned that he will run out of such measures by Nov. 3, at which point he would be left with only cash on hand and incoming tax revenue to pay incoming bills.
The budget agreement would prevent the Treasury secretary for taking out debt during the time the debt limit is suspended for any reason other than to pay a government commitment, to eliminate the possibility that he or she would stash a huge cash balance to operate freely when the new debt limit is put in place.
