By Corey Boles, Of DOW JONES NEWSWIRES
WASHINGTON -(Dow Jones)- Lawmakers need to increase the U.S. between $1.6 trillion to $2 trillion to support the borrowing through 2010, private budget analysts said Friday.
The Senate will debate an increase to the when lawmakers return from the holiday recess next week. In December, Congress approved a $290 billion increase to the cap to support the government’s borrowing through February. This lifted the total amount the federal government can borrow to $12.4 trillion.
In late December, House leaders said they were seeking an increase of between $1.8 trillion to $1.9 trillion in the cap to carry them through 2010.
If that estimate was accurate, then Congress needs to increase the borrowing limit by around $1.6 trillion, said Robert Bixby, executive director of the Concord Coalition.
By another calculation, the increase would have to be even higher, another economist said. Last August, the Obama administration forecast total debt to stand at around $14 trillion at the end of fiscal 2010.
Chris Edwards, director of tax policy at the Cato Institute, a right-of-center think tank, said using this forecast, the debt ceiling might have to be hiked by closer to $2 trillion.
Senior aides to House and Senate leadership declined to comment.
Initially, the Senate will bring up legislation that would hike the debt ceiling by around $635 billion, which was an increase passed by House lawmakers last year, minus the $290 billion lift Congress approved in December.
But Senate Majority Leader Harry Reid (D., Nev.) said he reserves the right to bring forward an amendment, which many analysts believe he will use to push for a broader increase in the debt ceiling.
A move to increase the debt ceiling is largely symbolic, as it represents money already spent by the federal government. In the unlikely scenario that Congress failed to increase the cap however, the consequences for global markets would be grave. The U.S. could lose its prized top-shelf credit rating, and be forced to pay substantially more in interest payments to its creditors, which could send the already weak dollar plummeting further.
The debate over the debt-increase will see several votes on measures aimed at reining in federal government spending.
These include trying to freeze discretionary spending for five years, immediately end the Treasury’s Troubled Asset Relief Program and canceling unused stimulus plan funds.
Most of those votes are likely to be unsuccessful, as they are Republican measures, but it will allow the party’s lawmakers to shine a light on the fiscal situation.
“We think it’s good ground for us to be fighting on the debt,” Sen. John Thune (R., S.D.), a member of the Senate Republican leadership, said Friday in an interview.
More tricky for the Democrats is a measure backed by several members of the party to create a commission mandated to provide solutions to the long-term fiscal imbalances the country faces.
A vote to create such a commission is expected to fail, but several Democrats have threatened to vote against any increase to the debt ceiling unless action is taken on the issue.
“Most of our group is not going to vote for any long-term extension to the debt without a credible commission” to tackle the long-term fiscal situation, Sen. Kent Conrad (D., N.D.) said Friday. Conrad is one of around a dozen moderate Democrats who have become increasingly concerned about the size of the federal debt.
In an interview, Conrad said he was open to alternatives to the commission, but he would insist on a commitment to take action to reduce the debt over the long term before agreeing to vote for a debt-ceiling increase.
Given that the December vote on the short-term debt limit increase needed every Democratic vote to be approved, Conrad’s threats of withholding support are being taken seriously by the leadership.
A spokeswoman for Reid said Friday that the majority leader shares Conrad’s concerns and is committed to finding a solution to the situation.
-By Corey Boles, Dow Jones Newswires; 202-862-6601; [email protected]