Remember the bitter debt ceiling debate in Washington last summer? The one that resulted in the first-ever downgrade of the U.S. credit rating? Well, another showdown could be in the offing sooner than planned.
The deal cut this summer to end the debt ceiling standoff provided for a $2.1 trillion increase in the country’s legal borrowing limit, which now stands at $16.394 trillion. At the time, it was estimated that such an increase could carry the Treasury Department safely beyond the contentious presidential election season and into early 2013.
But now that Congress has extended the payroll tax cut, emergency unemployment benefits and the so-called Medicare doc fix — only some of which was paid for — there is a greater chance that U.S. borrowing could reach the debt ceiling sooner. Treasury Secretary Tim Geithner recently told lawmakers that even with passage of the payroll tax bill — which will add an estimated $101 billion to deficits in fiscal year 2012 — he doesn’t expect the debt limit to be reached “until quite late in the year.” That’s a hair past the Nov. 6 election but smack dab in the middle of the fiscal firefight that Congress is expected to have over the expiring Bush tax cuts.
Meanwhile, the Bipartisan Policy Center, which analyzed projected monthly deficits and other factors that could play a role in Treasury’s borrowing, now projects that the debt ceiling could be hit between late November 2012 and early January 2013.