U.S. could hit debt ceiling again around election
The latest $1.2 trillion increase in the U.S. debt limit may not last through November’s election and could provide fresh ammunition for Republicans to attack President Barack Obama on what they see as a particularly vulnerable point - spending.
Based on current deficit rates and borrowing estimates, some analysts say the United States could reach the debt ceiling again before the November 6 vote. This would force the U.S. Treasury to turn once more to accounting maneuvers to avoid the unthinkable: asking Congress for another increase as the presidential election campaign reaches its crescendo.
But any moves by the Treasury would likely not stop the issue from becoming fodder for Republican attack ads.
Estimates on when the United States will reach its debt limit vary, but they leave little room for the Treasury to cope with an economic shock, such as a global slowdown triggered by a worsening of Europe’s debt crisis, which could shrink U.S. revenues and boost spending on unemployment aid.
“If the debt ceiling were to breached before the election, it would be possibly nuclear,” said Ethan Siegal, who advises institutional investors on Washington politics.
A full replay of last summer’s debt limit battle, which brought the United States to the brink of default and prompted a U.S. credit rating downgrade from Standard & Poor’s, would rattle markets and put Obama at the mercy of Republicans in the House of Representatives bent on slashing spending.
A central theme of the Republican election strategy to recapture the White House is to portray Obama as presiding over a spending binge that has seen U.S. deficits surge to record levels, although the White House counters that the outlays were necessary to prevent the 2007-2009 recession becoming another Great Depression.
In a largely symbolic protest, the Republican-controlled House voted on Wednesday to reject the latest $1.2 trillion increase.