Tuesday, August 02, 2011

U.S. Senate Passes Debt Ceiling Compromise Bill 74-26, Begich And Murkowski Vote Yes; Will Be The Largest Debt Ceiling Hike In U.S. History

On August 2nd, 2011, the U.S. Senate passed debt ceiling compromise legislation by a 74-26 vote. The legislation, which passed in the U.S. House 269-161 on August 1st, was piggybacked to S.365, a technical amendment to the Education Sciences Reform Act of 2002. The actual legislation is called the Budget Control Act of 2011, which can be read HERE. One hour later, President Barack Obama signed it into law. It basically trades an increase in the debt ceiling for matching cuts in the budget over a period of time. Read this CNN cheat sheet for a more expanded summary.

Among those voting Yes were both Alaska senators, Mark Begich (D) and Lisa Murkowski (R). Both communicated their intention to support it prior to the vote; both said it served the country well, even though each cited parts they didn't like. Begich wasn't happy about the failure of the compromise to raise new revenues by closing tax loopholes for America's wealthiest, while Murkowski said she was most concerned about the automatic, across-the-board cuts that would occur if Congress doesn't come up with targeted ones, noting that the automatic cuts would likely hurt Alaskans more than specific ones would.

Read the roll call vote at the following link:

-- http://www.senate.gov/legislative/LIS/roll_call_lists/roll_call_vote_cfm.cfm?congress=112&session=1&vote=00123

According to CNS News, the $2.4 trillion increase will be the largest in U.S. history, topping the $1.9 trillion increase passed by Congress and signed by President Obama on February 12th, 2010. This means the two largest increases in the debt ceiling will have occurred during the Obama Administration. Of course, Republicans are not guiltless:

-- What is now the third largest historical increase in the debt limit was enacted on March 27th, 2003, when then-President George W. Bush signed a law that lifted the limit by $984 billion. However, this was partially in response to the launching of the Iraq War on March 20th, 2003.

-- What is now the fourth largest historical increase was enacted on November 5th, 1990, when then-President George H.W. Bush signed a law that lifted the limit by $915 billion. However, this was partially in response to Operation Desert Shield, which began on August 2nd, 1990, which escalated into Desert Storm on January 17th, 1991.

So the two Republican administrations can cite the entry of America into external military conflict as an excuse for their increases; after all, what self-respecting president wants to shortchange the troops in beans and bullets. But unless Barack Obama intends to start a new war, he cannot cite military conflict so readily as an excuse.

The financial industry is sending mixed signals in reaction. According to Politico, Fitch said it will not downgrade the nation’s AAA credit rating now that Congress has passed the legislation. However, the Anchorage Daily News reports that Fitch still wants to see a credible plan to reduce the budget deficit to a level that would secure the United States' AAA status. Fitch will conclude its scheduled review of the U.S. sovereign rating by the end of the month. Neither Moody’s nor Standard and Poor’s have yet to comment on the debt legislation; the three entities rate debt that is issued by countries, states, corporations and municipalities based upon the likelihood of default. The AAA rating is the highest available and signifies an extremely low likelihood of default; if they downgrade us to AA, it would cost the federal government more to borrow money, which could increase our annual deficits and our national debt. Time says a downgrade could "send shock waves through the retirement plans of millions of Americans"; it could even have some effect on Alaska's Permanent Fund Dividend portfolio.

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