2013 United States debt-ceiling crisis

none March 2019 October 2013 issues In January 2013, the United States reached the $16.394 trillion debt ceiling that had been enacted following a crisis in 2011. The debt ceiling had been routinely raised previously on a bipartisan basis without conditions and without additional spending cuts. However, in 2013, members of the Republican Party staunchly opposed raising the debt ceiling unless Obama would agree to defund the Affordable Care Act (Obamacare), his signature legislative achievement.Weisman Jonathan Parker Ashley 2013-10-16 Republicans Back Down, Ending Crisis Over Shutdown and Debt Limit en-US The New York Times https://www.nytimes.com/2013/10/17/us/congress-budget-debate.html 2019-05-29 0362-4331 The debt ceiling issue was one of the causes for the 2013 government shutdown, and a lack of a budget bill over the issue forced the government to sequester its budget. The crisis, as well as the government shutdown, ended on October 17, 2013, with the passing of the Continuing Appropriations Act, 2014. Background United States debt ceiling After the passing in early January 2013 of the American Taxpayer Relief Act of 2012 to avert the projected fiscal cliff, political attention shifted to the debt ceiling.Hook Janet Fiscal-Cliff Focus Moves to House https://www.wsj.com/articles/SB10001424127887323320404578215373352793876 January 1, 2013 The Wall Street Journal January 1, 2013 Hughes, Siobhan The debt ceiling had technically been reached on December 31, 2012, when the Treasury Department commenced "extraordinary measures" to enable the continued financing of the government.http://www.treasury.gov/connect/blog/Documents/Sec%20Geithner%20LETTER%2012-26-2012%20Debt%20Limit.pdf Timothy F. Geithner December 26, 2012 Department Of Treasury letter to Honorable Harry Reid Majority Leader U.S. Senate from Timothy F. Geithner https://web.archive.org/web/20131019163723/http://www.treasury.gov/connect/blog/Documents/Sec%20Geithner%20LETTER%2012-26-2012%20Debt%20Limit.pdf 2013-10-19Fitch warns that debt-limit delay could hurt U.S. credit rating Jim Puzzanghera http://www.latimes.com/business/money/la-fi-mo-fitch-ratings-debt-limit-credit-u.s.-20130115,0,4766520.story LA Times January 15, 2013 January 16, 2013 The debt ceiling is part of a law (Title 31 of the United States Code, section 3101) created by Congress. According to the Government Accountability Office, "The debt limit does not control or limit the ability of the federal government to run deficits or incur obligations. Rather, it is a limit on the ability to pay obligations already incurred."Debt Limit: Delays Create Debt Management Challenges and Increase Uncertainty in the Treasury Market Government Accountability Office http://www.gao.gov/products/GAO-11-203 February 22, 2011 Government Accountability Office It does not prohibit Congress from creating further obligations upon the United States. The ceiling was last set at $16.4 trillion in 2011.Bernanke: Get rid of the debt ceiling Annalyn Kurtz https://money.cnn.com/2013/01/14/news/economy/bernanke-debt-ceiling/ https://web.archive.org/web/20130117070545/http://money.cnn.com/2013/01/14/news/economy/bernanke-debt-ceiling dead January 17, 2013 CNN Money January 15, 2013 January 16, 2013Obama digs in heels, refuses to negotiate debt ceiling Mark Felsenthal Matt Spetalnick https://www.reuters.com/article/us-usa-obama-debt-idUSBRE90D0UK20130115 Reuters January 16, 2013 January 15, 2013 On January 15, 2013, Fitch Ratings warned that delays in raising the debt ceiling could result in a formal review of its credit rating of the U.S., potentially leading to it being downgraded from AAA. Fitch cautioned that a downgrade could also result from the absence of a plan to bring down the deficit in the medium term. Additionally, the company stated that "In Fitch's opinion, the debt ceiling is an ineffective and potentially dangerous mechanism for enforcing fiscal discipline." Debate In a press conference held on January 14, 2013, President Obama stated that not raising the debt ceiling would cause delays in payments including benefits and government employees' salaries and lead to default on government debt. President Obama urged Congress to raise the debt ceiling without conditions to avoid a default by the United States on government debt. Raising the debt ceiling was also supported by Ben Bernanke, chairman of the Federal Reserve. Republican Speaker of the House, John Boehner and the Senate Republican minority leader, Mitch McConnell as well as other Republicans argued that the debt ceiling should not be raised unless spending is cut by an amount equal to or greater than the debt ceiling increase.Obama Escalates Debt Fight Carol E. Lee Janet Hook https://www.wsj.com/articles/SB10001424127887324235104578241512112508322 Wall Street Journal January 14, 2013 January 16, 2013Obama and G.O.P. Issue Challenges on the Debt Limit Jackie Calmes Jonathan Weisman https://www.nytimes.com/2013/01/15/us/politics/obama-to-press-house-gop-on-debt-limit.html New York Times January 14, 2013 January 16, 2013 Republicans also argued that the Treasury can avoid debt default by prioritizing interest payments on government debt over other obligations. Heritage Action, Family Research Council, and Club for Growth argued that a rise in the debt ceiling should be accompanied by a plan to balance the budget within ten years, through reduced spending in the discretionary budget as well as for entitlements.Why debt limit must be used to force a balanced budget Michael Needham Tony Perkins Chris Chocola https://www.politico.com/story/2013/01/why-the-debt-limit-must-be-used-to-force-a-balanced-budget-86244.html Politico January 15, 2012 January 16, 2013 Several Democratic House members, including Peter Welch, proposed removing the debt ceiling altogether. This proposal found support from some economists such as Jacob Funk Kirkegaard, a senior fellow at the Peterson Institute for International Economics. A survey of 38 economists found that 84% agreed that a separate debt ceiling that is periodically increased could lead to uncertainty and poor fiscal outcomes.Scrap the debt limit, some lawmakers and economists say Jim Puzzanghera Don Lee http://www.latimes.com/business/la-fi-no-debt-limit-20130123,0,3187040.story LA Times January 22, 2013 January 23, 2013 Debt ceiling suspension In mid-January, Paul Ryan, Chairman of the House Budget Committee, floated the idea of a short-term debt ceiling increase. He argued that giving Treasury enough borrowing power to postpone default until mid-March would allow Republicans to gain an advantage over Obama and Democrats in debt ceiling negotiations. This advantage would be due to the fact that postponing default until mid-March would allow for a triple deadline to be in March: the sequester on March 1, the default in the middle of the month, and the expiration of the current continuing resolution and the resulting federal government shutdown on March 27. This was supposed to provide extra pressure on the Senate and the President to work out a deal with the Republican-led House.https://www.cbsnews.com/news/ryan-floats-short-term-debt-limit-increase-idea/ Ryan floats short-term debt limit increase idea July 9, 2013 CBS Interactive Inc. January 17, 2013 Jill Jackson Shortly after that, the House learned that the Senate had not passed an independent budget plan since April 2009. House Republicans quickly came up with an idea that would suspend the debt ceiling enough to allow time for both chambers of Congress to pass a budget.September 2013 On February 4, 2013, President Obama signed into law the "No Budget, No Pay Act of 2013", which suspended the U.S. debt ceiling through May 18, 2013. The bill was passed in the Senate one week previously by a vote of 64–34, with all "no" votes from Republican senators,Business Insider http://www.businessinsider.com/senate-debt-ceiling-vote-2013-1 SENATE PASSES DEBT CEILING BILL Brett LoGiurato January 31, 2013 who were critical of the lack of spending cuts that accompanied an increase in the limit. In the House, the bill passed the week before by a vote of 285–144,Business Insider http://www.businessinsider.com/house-debt-ceiling-vote-no-budget-no-pay-2013-1 HOUSE PASSES DEBT CEILING BILL Brett LoGiurato January 23, 2013 with both parties voting in favor.Obama Signs The Debt Ceiling Bill, Ending The Debt-Limit Fight Until At Least August Brett LoGiurato http://www.businessinsider.com/obama-signs-debt-ceiling-bill-spending-cuts-taxes-2013-2 Business Insider February 4, 2013 February 26, 2013 In the House, Republican representatives attached a provision to mandate the temporary withholding of pay to members of Congress if they did not produce a budget plan by April 15. Pay would be reinstated once a budget was passed or on January 2, 2015 (the last day of the 113th Congress), whichever came first.Obama signs bill suspending debt limit Associated Press http://www.pottsmerc.com/article/20130204/NEWS04/130209742/obama-signs-bill-suspending-debt-limit The Mercury February 4, 2013 February 25, 2013 Under the law, the debt ceiling would be set on May 19, 2013, to a level "necessary to fund commitment incurred by the Federal Government that required payment." Developments during suspension 2014 United States federal budget Budget sequestration in 2013 On March 1, the sequester, cutting $1.2 trillion over the next decade, went into effect after the parties failed to reach a deal. On March 21, the House passed a FY 2014 budget that would balance the United States budget in 2023. This was a shorter period than envisaged in their 2013 budget, which balanced in 2035, and the 2012 budget, which balanced in 2063. It passed the House on a mostly party-line 221–207 vote. However, later that day, the Senate voted 59–40 to reject the House Republican budget.https://www.foxnews.com/politics/house-passes-gop-budget-plan-promising-deep-cuts-but-senate-votes-plan-down/ House passes GOP budget plan promising deep cuts, but Senate votes plan down Fox News July 9, 2013 March 21, 2013 Associated Press On March 23, the Senate passed its own 2014 budget on a 50–49 vote. The House refused to hold a vote on the Senate budget.https://www.senate.gov/legislative/LIS/roll_call_lists/roll_call_vote_cfm.cfm?congress=113&session=1&vote=00092 U.S. Senate: Legislation & Records Home > Votes > Roll Call Vote July 9, 2013 2013 U.S. Senate Internet Services On April 10, the President released his own 2014 budget, which was not voted on in either house of Congress. Throughout March and April, there were several developments that reduced the sequester's impact. The bill that extended the government's continuing resolution to September 30 lessened the sequester's effect on defense, and later bills removed furloughs for air traffic control and food service industries. Debt ceiling reached again On May 19, the debt ceiling was reinstated at just under $16.7 trillion to reflect borrowing during the suspension period. As there was no provision made for further commitments after the ceiling's reinstatement, Treasury began applying extraordinary measures once again.https://fpc.state.gov/documents/organization/214922.pdf Reaching the Debt Limit: Background and Potential Effects on Government Operations Levit Mindy R. Brass Clinton T. 2013-09-19 Congressional Research Service 7–5700 2 Nicola Thomas J. Nuschler Dawn https://web.archive.org/web/20131021071949/https://fpc.state.gov/documents/organization/214922.pdf 2013-10-21 dead Despite earlier estimates of late July, Treasury announced that default would not happen "until sometime after Labor Day". Other organizations, including the Congressional Budget Office (CBO), projected exhaustion of the extraordinary measures in October or possibly November.Sahad Jeanne https://money.cnn.com/2013/05/16/news/economy/debt-ceiling/index.html https://web.archive.org/web/20130607212304/http://money.cnn.com/2013/05/16/news/economy/debt-ceiling/index.html dead June 7, 2013 Debt ceiling: Treasury starts juggling act CNNMoney May 17, 2013 July 9, 2013 On August 26, 2013, Treasury informed Congress that if the debt ceiling was not raised in time, the United States would be forced to default on its debt sometime in mid-October.http://www.treasury.gov/initiatives/documents/082613%20debt%20limit%20letter%20to%20congress.pdf letter to Honorable John A. Boehner Speaker U.S. House Of Representatives from Jacob J. Lew Jacob J. Lew August 26, 2013 www.treasury.gov 2013-10-20 https://web.archive.org/web/20131017174553/http://www.treasury.gov/initiatives/Documents/082613%20Debt%20Limit%20Letter%20to%20Congress.pdf 2013-10-17 On September 25, Treasury announced that extraordinary measures would be exhausted no later than October 17, leaving Treasury with about $30 billion in cash, plus incoming revenue, but no ability to borrow money. The CBO estimated that the exact date on which Treasury would have had to begin prioritizing/delaying bills and/or actually defaulting on some obligations would fall between October 22 and November 1.http://www.treasury.gov/Documents/Debt%20Limit%2020130925%20Boehner.pdf letter to Honorable John A. Boehner Speaker U.S. House Of Representatives from Jacob J. Lew Jacob J. Lew September 25, 2013 www.treasury.gov 2013-10-20 https://web.archive.org/web/20130929000713/http://www.treasury.gov/Documents/Debt%20Limit%2020130925%20Boehner.pdf 2013-09-29 October 2013 debt ceiling debate Obama and Republicans disagreed on the terms of raising the nation's debt limit, and even as to whether the debt limit should even be a subject of negotiation. House Republicans described a number of policies they wanted to enact before they would agree to increasing the debt ceiling beyond October 2013:http://www.nationaljournal.com/congress/house-republicans-draft-their-debt-ceiling-playbook-20130707 House Republicans Draft Their Debt-Ceiling Playbook August 27, 2013 July 7, 2013 Tim Alberta Tim Alberta Long term debt ceiling increase (allowing Treasury to borrow for the rest of Obama's term): privatize Medicare and/or Social Security. Medium term debt ceiling increase (allowing Treasury to borrow until sometime in 2015): cut food stamps, use the chained consumer price index (CPI), tax reform, agree to enact block-grant Medicaid or a large raise in the retirement age. Short term debt ceiling increase (postponing default until sometime in the first half of 2014): means testing of Social Security, a small raise in the retirement age or ending agricultural subsidies. Obama, in turn, asserted that the 2013 sequestration cuts already represented a budget compromise, and that he did not intend to negotiate further on the issue of debt repayment. However, the president said that he would be willing to negotiate on almost any issue after a clean bill to reopen the government and increase the debt ceiling had been passed.Holland Steve Felsenthal Mark September 16, 2013 Obama says he will not negotiate with Congress on debt ceiling Reuters https://www.reuters.com/article/us-usa-economy-obama-idUSBRE98F0OA20130916 2023-01-29 In September 2013 the House of Representatives drafted a bill that would postpone default for approximately twelve months from its passage. The bill also included a one-year delay in implementation of the Patient Protection and Affordable Care Act, a requirement for both houses of Congress to vote on tax reform plans by the end of 2013, and a fast-track process to begin construction of the Keystone XL Pipeline. However, the bill was not voted on by the House or Senate due to some members of the House Republican caucus believing that the bill did not make deep enough spending cuts to be worthy of Republican support. The US Government went into a partial shutdown on October 1, 2013, with about 800,000 Federal employees being put on temporary leave. Treasury Secretary Jack Lew reiterated that the debt ceiling would need to be raised by October 17.news.com.au http://www.news.com.au/business/markets/what-happens-if-the-us-government-shuts-down/story-e6frfm30-1226730724779 https://web.archive.org/web/20131001024603/http://www.news.com.au/business/markets/what-happens-if-the-us-government-shuts-down/story-e6frfm30-1226730724779 dead October 1, 2013 What happens if the US government shuts down? October 1, 2013 Victoria Craw AAP In early October 2013, the House drafted a bill that would raise the debt ceiling without conditions through November 22, but keep the partial government shutdown in place. However, it died due to insufficient support among both House Republicans and House Democrats. Resolution On October 16, the Senate passed the Continuing Appropriations Act, 2014, a continuing resolution, to fund the government until January 15, 2014, and suspending the debt ceiling until February 7, 2014, thus ending the 2013 United States federal government shutdown and debt-ceiling crisis. It set up a House–Senate budget conference to negotiate a long-term spending agreement, and strengthened income verification for subsidies under the Patient Protection and Affordable Care Act. The Senate vote was 81–18 in favor, with 1 member absent due to illness. The House passed the bill unamended later that day, by a vote of 285–144, with 3 members absent due to illness. The President signed the bill early the next morning on October 17. Under the resolution, the debt ceiling debate and partial government shutdown were postponed, with federal workers returning to work on October 17.Montgomery Lori Obama signs bill to raise debt limit, reopen government https://www.washingtonpost.com/politics/house-effort-to-end-fiscal-crisis-collapses-leaving-senate-to-forge-last-minute-solution/2013/10/16/1e8bb150-364d-11e3-be86-6aeaa439845b_story.html October 17, 2013 The Washington Post October 16, 2013 Helderman, Rosalind S. On January 14, 2014, the House and the Senate Appropriations Committees agreed on a spending plan that would fund the federal government for two years. A bill extending the previous continuing resolution through January 18 was also passed.Voice of America: US Congress Agrees on 2014 Spending Bill, January 14, 2014. On January 16, 2014, Congress passed a $1.1 trillion appropriations bill that will keep the federal government funded until October 2014.US News: Appropriations Bill Overcomes Congressional Hurdles, January 16, 2014. President Obama signed the appropriations bill into law on January 18.Bloomberg, January 18, 2014 – Obama Signs $1.1 Trillion U.S. Government Spending Bill by Kathleen Hunter and Derek Wallbank On February 7, 2014, the debt limit suspension expired and treasury began applying extraordinary measures once again, warning that such measures would not last beyond February 27 due to large tax refunds that would need to be paid during February. On February 11, after finding insufficient support for various conditions for increasing the debt ceiling, the House passed a bill suspending the debt ceiling without conditions through March 15, 2015. The Senate passed the bill unamended on February 12, 2014, and it was signed into law as Public Law 113-83 by the President on February 15.Shaheen Jeanne 2014-02-15 Actions - S.540 - 113th Congress (2013-2014): Temporary Debt Limit Extension Act https://www.congress.gov/bill/113th-congress/senate-bill/540/all-actions 2021-06-01 www.congress.govAustin D. Andrew April 1, 2021 The Debt Limit Since 2011 https://fas.org/sgp/crs/misc/R43389.pdf May 31, 2021 Federation of American Scientists Reaction Effect on United States debt rating October 2013 Just as during the 2011 debt ceiling crisis, the 2013 crisis caused rating agencies to re-evaluate the rating of US government debt. On October 15, Fitch Ratings placed the United States under a "Rating watch negative" in response to the crisis.https://www.reuters.com/article/fitch-places-united-states-aaa-on-rating-idUSFit67327220131015 Fitch Places United States' 'AAA' on Rating Watch Negative Reuters October 15, 2013 October 16, 2013 On October 17, Dagong Global Credit Rating downgraded the United States from A to A−, and maintained a negative outlook on the country's credit.https://www.reuters.com/article/idUSL3N0I71YW20131017 Dagong Downgrades US to A- from A Reuters Christopher Langner October 17, 2013 October 17, 2013 Effect on the U.S. Stock Market According to a Morningstar analysisLauricella Tom Solberg Lauren 2021-09-29 Investors Can Ignore Debt-Ceiling Showdowns ... Usually https://www.morningstar.com/articles/1060068/investors-can-ignore-debt-ceiling-showdowns-usually 2021-10-18 Morningstar.com en of debt-ceiling and government shutdown situations, the U.S. stock market remained relatively unchanged during the 2013 crisis period. Political aftermath In the immediate aftermath of the crisis opinion polls showed approval to drop for the Republican Party. Polls showed that Americans blamed the Republicans more for the shutdown than President Barack Obama by a margin of 22 points (53 percent to 31 percent).http://firstread.nbcnews.com/_news/2013/10/10/20903624-nbcwsj-poll-shutdown-debate-damages-gop?lite NBC/WSJ poll: Shutdown debate damages GOP NBC News October 16, 2013 Another poll showed a 74% disapproval rating of the way Republicans handled the crisis while 61% disapproved of the way Democrats handled the budget talks.http://www.nydailynews.com/news/politics/poll-shows-74-americans-disapprove-republican-handling-budget-crisis-article-1.1486576 Poll shows 74% of Americans disapprove of Republican handling of budget crisis The New York Times Adam Edelman October 15, 2013 October 16, 2013 According to a Gallup Poll, "60 percent of respondents said that a third major party is needed to represent the American people", an all-time high.http://readingeagle.com/article.aspx?id=516601 Many Americans want third major political party, poll finds Liam Migdail-Smith readingeagle.com October 16, 2013 October 17, 2013 https://web.archive.org/web/20131017070627/http://readingeagle.com/article.aspx?id=516601 dead See also Budget Control Act of 2011 European sovereign debt crisis History of United States debt ceiling 2008 financial crisis United States Congress Joint Select Committee on Deficit Reduction United States federal government credit-rating downgrades 2011 United States debt-ceiling crisis 2023 United States debt-ceiling crisis 2013 United States federal government shutdown 1995–1996 United States federal government shutdowns References 30em Debt-ceiling crisis Category:Economy of the United States Debt-ceiling crisis Debt-ceiling crisis Debt-ceiling crisis Debt-ceiling crisis Category:2013 in economic history