House puts debt limit in rear-view
WASHINGTON — The House of Representatives voted overwhelmingly on Wednesday to suspend the nation's debt limit until May, allowing the federal government to continue to pay its bills and removing an immediate threat to the economy as it struggles to gain strength.
The move, expected to be ratified by the Senate and signed by President Obama, signaled that the government will not repeat the 2011 debt limit battle this month, a skirmish that frightened Wall Street and led to a downgrading of the nation's credit rating and could have done so again.
Several economists said the short-term extension will help the economy by removing the immediate threat of default and setting the stage for a calmer debate over two other clashes over federal spending — a looming automatic cut in spending called a sequester and the expiration of a continuing resolution that's financing many government operations.
“It helps because it eliminates the risk that we'd hit the debt ceiling soon,” said Nigel Gault, chief economist for forecaster IHS Global Insight. “It means we can consider, in a less frantic atmosphere, the sequester and the CR (continuing resolution).”
But economists stressed that a short-term debt limit extension is only a bandage covering a festering long-term fiscal problem that Congress and the White House need to get a handle on to better instill confidence in the economy.
Congress faces deadlines on the automatic spending cuts scheduled to take effect March 1 and must deal with the expiration of the continuing resolution appropriations measure to keep the government operating in March.
The extension prolongs the uncertainty over Washington's eventual decision on fiscal matters, said Steven Ricchiuto, chief economist for Mizuho Securities USA in New York. “There is going to be no certainty until somebody blinks here on spending and taxes,” he said.
Ricchiuto added: “It's almost as if the Republicans are taking control of the debate, but now they have to do a better PR job. What they're saying is, ‘We're being reasonable, now it's time for you to be reasonable.' ”