Concerns about debt ceiling rise again

House Republican leaders now are likely to forgo attaching a federal debt ceiling increase to the fiscal 2002 supplemental spending bill coming to the House floor next week, fearing that a peculiar alliance of Democrats and conservative Republicans would otherwise sink the legislation.

But the two issues will remain linked. According to GOP leadership aides, Republicans now are hoping to attach a debt limit increase to the supplemental in conference. But the revised strategy casts more uncertainty on a Bush administration priority that presidential aides are pushing with growing intensity as fears grow that the ceiling will soon be breached.

Treasury Secretary Paul O'Neill Wednesday stepped up his campaign for the administration's proposal to add $750 billion to the total allowable debt.

"We need a debt ceiling [increase] passed, and we need it pretty soon," O'Neill said during an appearance on Capitol Hill. "We've already committed the resources that are going to drive us through the existing debt ceiling."

In order to avoid hitting the debt ceiling in April, the Treasury Department suspended investment of as much as $18.7 billion of federal employees' money in the G Fund, the portion of the federal 401k-style Thrift Savings Plan that is normally invested in Treasury securities. Treasury then restored the funds, with interest, after tax receipts started pouring in.

Treasury reportedly will bump up against the ceiling sometime this month and, by the end of June, could run out of strategies to avoid breaching it.

Nevertheless, O'Neill expressed confidence Congress would ultimately act. "It's not a question of whether we're going to do it or not, it's just a question of how close the cliff we're going to run before we do what we know we need to do," he said.

But Republican leaders believe that if they add the administration proposal to the supplemental, the rule on the bill will fail because fiscal conservatives in their own conference will oppose it. And Democrats, who often vote against Republican rules, will oppose this one and then use the failure to raise the debt limit to highlight what they charge is the worsening budget picture caused by last year's tax cut.

"They want to blame us for blowing up the deficit," said one Republican leadership aide. Republicans instead intend to attach to the supplemental placeholder language related to the debt ceiling--although not an actual increase--so that the issue can be raised in conference. Then, if Senate Democratic conferees sign off on a debt ceiling increase, Democrats in the House will be less likely to oppose the combined legislation when the final product is brought to the floor.

"[Senate Majority Leader Tom] Daschle [D-S.D.] understands it is his responsibility to deal with this issue," said the GOP leadership aide.

However, this source added that for conservative GOP lawmakers to accept the placeholder language and pass the rule next week, GOP leaders may have to add language defining an overall fiscal 2003 spending limit.