WASHINGTON – The lean economy has Congress reaching its self-imposed debt limit, and one member has a novel solution to the problem that sounds an awful lot like what got Enron Corp. into trouble.
Rep. Christopher Cox, R-Calif., who says he has the backing of top economic minds, is proposing that the government redefine its debt — by taking nearly $2 trillion in intra-governmental debt off the books — and then lowering the debt ceiling.
Democrats call such tactics a shell game à la Enron, the energy giant that hid $1 billion in bad debt in offshore partnerships until it went belly up last December.
Currently, what the country borrows publicly as well as the internal debt between agencies, so-called "intra-governmental obligations" like the un-funded liabilities attached to the Social Security trust fund and Medicare, both count toward the debt ceiling.
Cox wants to take those intra-governmental obligations out of the debt-ceiling equation. Congressional Budget Office Director Dan Crippen supports the idea. He has said that removing them gives a more accurate impression of what the nation's books look like.
"The exchange between the government and the private sector — how much the government is going to borrow from capital markets — counts more than how much one part of the government is loaning to or borrowing from the other," he told a House budget panel.
The last time the ceiling was raised was in 1997. Since then, four straight years of budget surpluses have meant no need to borrow and no need to raise the ceiling.
But since then war and recession have depleted the coffers, leading the Bush administration to propose deficit spending for the next several years and borrowing to cover the bill.
Last week, the Treasury Department told lawmakers that the federal debt will brush up against the $5.95 trillion ceiling — the congressionally imposed limit on the nation's debt — by the end of the month if something isn't done to avoid it.
The Treasury wants to raise the limit to at least $6.7 trillion as part of an emergency homeland security and defense spending package Congress will consider later this month.
Congressional aides say, however, that the debt bill will likely be peeled off from the spending package so Congress can make political hay out of the issue.
Cox's proposal, so far lacking much support, is a last-ditch effort to prevent hitting the ceiling while at the same time deflecting criticism from the Bush administration in a midterm election year.
"This really is an opportunity for Democrats. No one wants to be responsible for raising the debt limit, particularly in an election year," said Robert Bixby, executive director of the Concord Coalition, a watchdog group that proposes a modest increase to keep government spending in check.
Whatever the solution, the amount of debt the United States carries will have less impact on the economy than whatever political debate it fuels, says Dan Mitchell, senior economist for the Heritage Foundation.
"We are so far from a crisis situation that it isn't even funny. I don't think there will be any lasting effect [to raising the limit]," he said.