Published November 28, 2012
While lawmakers scramble to avoid a catastrophic budget meltdown known as the "fiscal cliff," the nation also is fast approaching its borrowing limit -- and expenses like the nearly $100 billion tab for superstorm Sandy damage are only pushing the nation further into a rising sea of red ink.
A new report released Tuesday by an independent group warns that the federal government is weeks away from hitting its debt ceiling -- and, unless debt limits are raised, it risks defaulting on its loans.
According to an analysis from the Bipartisan Policy Center, the government is projected to reach its current statutory debt limit of $16.4 trillion in the last week of December.
"If the debt limit is not increased as part of the lame duck negotiations, policymakers will be left with only a matter of weeks to ensure that all federal financial obligations continue to be met in full and on time," the group concluded in its report.
It is not known whether Congress will be able to raise the debt ceiling before Jan. 1, 2013. Senate Majority Leader Harry Reid, however, indicated Tuesday that a higher debt limit is needed as part of a deal to avoid the fiscal cliff.
The Nevada Democrat reportedly said that Democratic lawmakers "would be somewhat foolish to work out something on stopping us from going over the cliff," without raising the debt ceiling as part of that deal.
Adding to the government's financial woes is the mounting federal aid for victims of last month's Hurricane Sandy -- a figure that could reach hundreds of billions of dollars. New Jersey Gov. Chris Christie is asking for nearly $37 billion in federal aid to recover and rebuild after the storm, while New York Gov. Andrew Cuomo is requesting about $42 billion in federal aid -- $32 billion for repairs and restoration and more than $9 billion to head off future disasters.
Lawmakers last raised the debt ceiling in 2011, when a similar battle of raising taxes or cutting spending prompted them to pass the Budget Control Act. That law created a "supercommittee" of lawmakers that was supposed to come up with ways to meaningfully reduce the federal deficit. To put pressure on Congress to reduce the deficit by $1.2 trillion over the next decade, the act mandated "sequestration" cuts to programs including defense and Medicare in the same amount if no deal was reached.
No deal was reached, and Congress is now trying to avert the automatic cuts, even as it works on a new deal to raise the debt ceiling.