If it weren’t for the debt limit deadline in October 2013, the federal government could still be shut down. But the imminent possibility of debt default during the fall of 2013 (an issue which first spooked the markets during the summer of 2011), along with the political damage that the government shutdown was causing, focused the minds in Congress, leading to a deal that effectively decoupled the debt limit and government spending debates.
Under the leadership of Sen. Patty Murray (D-WA) and Rep. Paul Ryan (R-WI) to set the top-line budget number for the next two fiscal years, followed by efforts by Sen. Barbara Mikulski (D-MD) and Rep. Hal Rogers (R-KY) to fill out the spending details, Congress has reached a détente on government spending issues for the foreseeable future.
Can the same be said about the debt limit?
Polling conducted throughout the fall of 2013 suggests that the American public dislikes government shutdowns, but also dislikes raising or extending the debt limit. This political reality has largely governed the response on Capitol Hill. Congress’ first political imperative was to take a government shutdown off the table until after the 2014 mid-term elections. But will Congress have the same political will to address the unpopular debt limit issue now floating out there on its own?
The timing of when this issue will have to be addressed is particularly important given the political calendar. Under the agreement reached in October 2013, the debt limit was extended by statute until Feb. 7, 2014. However, Treasury could use “extraordinary measures” from that date (like not immediately funding the pension system for federal employees and using other accounting gimmicks) to effectively not default or stop paying bills until a later date.
Unfortunately, Treasury is projecting little wiggle room this time around due to cash outflows resulting from tax refunds. Therefore, Congress will likely have to deal with this in February. That’s right in the middle of its political primary season, an extremely delicate time — especially for House Republicans.
ASPPA and NAPA remain concerned about the negative impact that a debt limit standoff could have on retirement security. In fact, our research has shown that 401(k) account balances could fall by more than 20% if Congress and the administration fail to address this issue. ASPPA and NAPA will closely monitor the House Republican Conference retreat next week for their plan of action. Stay tuned.
Andrew Remo is ASPPA’s Congressional Affairs Manager.
