Although Senate leaders are still hoping to consider a debt limit increase by the end of next week, it appears likely there will be no resolution on the issue for several months unless both parties and both chambers can end a game of political chicken and craft a deal.
In a letter to House Speaker Dennis Hastert, R-Ill. Friday, Treasury Secretary John Snow said he would be forced next week to withhold investing portions of the civil service retirement fund not needed to pay beneficiaries in order to stave off a fiscal crisis.
Twice last year, the Treasury Department suspended daily investments of billions of dollars of federal employees' retirement funds to avoid breaking the debt ceiling.
The suspension affected investments in the Civil Service Retirement and Disability Fund and the Thrift Savings Plan's G Fund. Federal employees and retirees didn't see any changes in their pensions or TSP accounts due to the accounting maneuver, however. Treasury is required to keep track of the interest the funds would have earned had the investments taken place and repay the money after debt crises pass.
The Treasury Department has been asking for Congress to raise the $6.4 trillion statutory debt ceiling. But Snow's action on the civil service fund, coupled with an influx of cash the government would get after the April 15 tax deadline, means there is not likely be another debt limit crunch until June or July, sources said.
But that is not to say the Senate may not give it a try next week. Because of the reinstatement of the so-called Gephardt rule in the House, when the House passes the fiscal 2004 budget conference report, legislation raising the debt ceiling is automatically kicked over to the Senate. It is likely, then, that the Senate might take up that legislation, which would raise the debt ceiling by about $860 billion, possibly by the end of next week.
If approved, the legislation would be sent directly to the president. While that would satisfy House Republicans by sparing them an up-or-down vote on increasing the debt limit, House Democrats are already crying foul. The Blue Dog Coalition of conservative Democrats this week blasted Republicans for trying to "slip through the largest debt limit increase in history" and called on the Senate to craft a smaller plan and force a conference on the legislation.
Asked about Democratic calculations Thursday, Senate Finance ranking member Max Baucus, D-Mont., said a debt ceiling number should be fair to both sides, implying that Democrats may not be willing to support an increase as large as $860 billion. Sources also confirmed that Republicans and Democrats are talking about a compromise.
Also a possibility, according to Senate Democratic sources, is an attempt to attach an amendment by Sen. Russell Feingold, D-Wis., that would extend pay-as-you-go rules and sequestration. If adopted, that amendment could prove troublesome down the road because it would effectively force both mandatory spending increases and tax increases to be paid for with corresponding offsets, complicating the ability to pass prescription drug legislation or even the president's tax cut.
But a Senate GOP source said that if Democrats are successful in attaching the amendment, then Republicans would probably hold the debt limit increase in conference until the Treasury Department runs out of tools to keep the government solvent. Republicans would then strip out the amendment and force a vote on a clean debt limit bill, the source said.