White House Steps up Pressure on Congress: “There is No Way Around” Increasing the Debt Limit

By Cullen Dirner

May 18, 2011 4:01pm

From Sunlen Miller (@sunlenmiller): Two days after the federal government reached its $14.29 trillion limit, The White House today ratcheted up pressure on Congress to increase the debt ceiling by August 2nd.  Their message today is: there is no way to push this vote off, Capitol Hill.

“There really is no alternative to raising the debt limit,” an administration official said, “there is no way around it.”

Officials said there is no Plan B, no emergency plan if the debt limit is not raised.

“There is no alternative to increasing the debt limit. There is not a secret plan that’s available that can make everything alright.”

Senior administration officials said there is an “observable phenomenon”  in the past when the government has had to raise the debt limit when members of Congress say ‘wait, there must be more time, there must be some way that I have to face this decision.’

Today, they stressed, there is no way around this, and members of Congress must face this decision.

Administration officials used past as precedent,  providing letters from administrations past requesting the debt limit to be raised, warning against the same economic impacts should it not be raised, including letters sent by President Ronald Reagan in 1983 to then Senate Majority Leader Howard Baker and from 1987 from Secretary Baker to Speaker Jams Wright describing the “unprecedented and catastrophic would ensure,” if the debt ceiling was not raised then.

“You can see that the administration in both parties, Secretaries of Treasury in both parties have spoken about the debt limit and made the same conclusions about the effects of a failure to increase the debt limit over decades.”

As we reported on Monday, the government has created some wiggle room postponing any defaulting on payments until August 2nd by measures which include borrowing billions from special government funds that are used to provide benefits to retired and disabled Federal employees, stabilize the dollar or foreign currencies or fund local and state securities.

Today administration officials said they have also told Congress that there’s one other step they could deploy between now and August 2nd –unwinding the dollar denominated portion of the exchange stabilization fund, a fund maintained to intervene in currency markets. But, that would only be an addition of $23 billion, not large in the grand scheme of things.

So in sum, with Monday’s announcement and the extra $23 billion that would mean a total of $230 billion of headroom can be created between now and August 2nd.

But, that’s it. No more headroom, administration officials stressed today.

“When we reach that date we really will be out of room for additional borrowing.”

Democrats on the Hill and the administration have called for a “clean” authorization and Republicans have called for spending cuts to be included in any deal to raise the debt ceiling.

Some conservatives have suggested extreme measures to reduce the deficit such as selling off government assets like land, real estate, or even the 261.5 million ounces of gold.

Administration officials warned against this and the need to be “extremely careful” suggesting such moves.

“We need to be extremely careful. We are not interested in fire sales where we would be dumping assets on the market, getting a depressed price and not recognizing a good return for taxpayers,” a senior administration official said. “The idea of dumping gold on the market in a hurried sale would be extremely disadvantageous not only to the taxpayers but to the markets.”

Administration officials also noted that it wouldn’t change the fact that when you got though selling the assets you would still need to raise the debt limit.

-Sunlen Miller

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