October 10, 2013

Sen. Collins skeptical of claims that debt-ceiling deadline would spell immediate default

The Maine Republican says she believes the Treasury Department would be be able to buy some more time.

By Kevin Miller kmiller@pressherald.com
Staff Writer

WASHINGTON — U.S. Sen. Susan Collins said Wednesday she is skeptical that the nation would begin defaulting on what it owes if Congress doesn’t vote to increase the debt limit by Oct. 17, as President Obama, other Democrats and many economists have predicted.

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Sen. Susan Collins, R-Maine.

The Associated Press

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“I’ve been here long enough when we’ve come to what was supposed to be the date of default and the Treasury finds a way to shift obligations or payments . . . in a way that gives us a little more time,” Collins said. “However, I do not doubt that we are coming close to the point where we will need to do something about the debt ceiling.”

Collins, a moderate Republican, made her comments Wednesday moments after emerging from a meeting with Republican senators, where she presented a plan to end the government shutdown and repeal a medical-device tax contained in the Affordable Care Act. The plan, which Collins said she hopes to expand to include a temporary extension of the debt ceiling, appears to be gaining traction among Republicans but has yet to pick up any public support among Democrats.

Hundreds of thousands of federal workers remain furloughed because of the government shutdown as Democrats and Republicans clash over Republican attempts to link changes to the Affordable Care Act to a temporary budget. But talk in Washington is increasingly turning to the debt ceiling and what would or would not happen if the U.S. passes the Oct. 17 deadline without extending the debt limit.

Treasury Secretary Jack Lew said Sunday that “on the 17th, we run out of our ability to borrow, and Congress is playing with fire” by delaying a vote to increase the debt ceiling from $16.7 trillion. At that time, the government will have used all “extraordinary measures” to stay below the ceiling, raising questions about Washington’s ability to pay its bills.

Lew has declined to say exactly when the United States is likely to begin missing payments, The Washington Post reported Tuesday.

But analysts say it would happen no later than Nov. 1, when the Treasury Department is due to pay out nearly $60 billion to Social Security recipients, Medicare providers, civil-service retirees and active-duty military service members, the Post reported.

Some Republicans have accused the Obama administration of exaggerating the significance of the Oct. 17 debt-limit deadline, and that they are skeptical of the contention that defaulting on the nation’s debt would lead to a global economic crisis.

Collins said Wednesday that a default would have “dire consequences.” Economists, business groups and financial analysts say Congress risks sending financial markets tumbling – potentially triggering another recession and global economic turmoil – if a deal is not struck before Oct. 17.

“The markets have been trying to remain calm and with surprising success, but I don’t see that lasting until 11:59 and 59 seconds” on Oct. 17, said Neil Buchanan, a law professor at George Washington University who specializes in tax, spending and the national debt.

Buchanan said consumers and investors already appear to be reacting to uncertainty over the debt limit – the Dow is down about 6 percent since mid-September. Delaying negotiations on a deal into next week will only heighten those concerns, especially given that House Speaker John Boehner has been unable to win the support of a majority of his caucus for past deals, Buchanan said.

“Waiting until the last possible moment, they might not be able to do anything at all,” he said.

Charles Colgan, an economist at the University of Southern Maine, said that after Oct. 17, the Treasury Department predicts it will be operating on a day-to-day basis. But he said that amid the uncertainty, government vendors will likely ask whether they will receive a check.

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