WASHINGTON -- With Congress considering a tax cut package that could exceed $70 billion and the Treasury Secretary again being forced to take extraordinary measures to avoid breaching the $8.18 trillion statutory debt limit, The Concord Coalition said today that Congress should act promptly to approve an increase in the statutory debt limit accompanied by budget enforcement mechanisms to limit further increases in the debt. Concord recommended that any legislation providing a large-scale increase in the debt limit also include provisions reinstating pay-as-you-go rules for all legislation that would increase the deficit.
“It is clear that the debt limit must be increased. Failure to approve an increase would have dire consequences for government finances and financial markets. Delaying action on an increase until the last possible moment, forcing Treasury to utilize extraordinary measures to avoid a default, is unnecessary and irresponsible. However, under the current fiscal circumstances approving a large-scale increase in the debt limit without a plan to restore fiscal discipline would also be irresponsible,” said Robert Bixby, Executive Director of The Concord Coalition.
“Congress should pass a short-term increase in the debt limit to address the immediate crisis and begin work on measures to restore fiscal discipline to accompany a large scale increase in the debt limit. Such a plan should at a minimum provide for reinstating pay-as-you-go rules for all tax and spending legislation. The rationale for this trade-off is clear: greater flexibility to increase the debt is allowed, but only within the context of a fiscally responsible budgetary framework.,” Bixby said.
Despite warnings by Treasury Department officials that the government was on the brink of reaching the debt limit and the need for additional funds to support troops in Iraq and Afghanistan, Congressional action last week focused on going forward with tax cuts legislation which would add another $70 billion to the debt.
“Instead of working on another round of debt-financed tax cuts, Congress should own up to the consequences of tax and spending policies which have resulted in deficits by having a full debate and vote on an increase in the debt limit,” said Ed Lorenzen, Policy Director of The Concord Coalition. “If Congress wants to avoid regular votes on increasing the debt limit, the remedy is to reconsider the fiscal policies which have made repeated increases in the debt limit necessary.”
The Concord Coalition is a nonpartisan, grass roots organization dedicated to balanced federal budgets and generationally responsible fiscal policy. Former U.S. Senators Warren Rudman (R-NH) and Bob Kerrey (D-NE) serve as Concord's co-chairs and former Secretary of Commerce Peter Peterson serves as president.
The Concord Coalition Issue Brief: Understanding the Federal Debt Limit (PDF): http://www.concordcoalition.org/issues/feddebt/doc/060130UnderstandingDebtLimit.pdf