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.
“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.
“It is psychological rather than technical,” Colgan said of the Oct. 17 deadline. “But by that point, the damage is done.”
The U.S. Chamber of Commerce has urged Congress to quickly address the shutdown and the debt ceiling.
“There are a lot of moving pieces and different views being discussed, but the needs of the country are clear,” Chamber Executive Vice President for Government Affairs Bruce Josten said in a written statement. “Congress and the administration must find a path forward on a continuing resolution and on the debt limit to preserve the normal operations of government and to remove a serious threat to the full faith and credit of the United States.”
Obama met with congressional Democrats at the White House on Wednesday and plans to meet with Republicans on Thursday. The invitations were viewed as a rare positive sign as the nation entered its 10th day of a partial government shutdown caused by a congressional stalemate over whether to link the budget to funding the Affordable Care Act, as some Republicans insist.
The Senate is expected to hold the first votes later this week on a Democratic plan to increase the debt ceiling with no other issues attached. Collins said attempting to increase the debt limit by $1 trillion “appears to be a non-starter in my caucus” without changes to spending or to the health care act.
Collins would not say whether she would vote to proceed with consideration of the Democratic debt ceiling plan and predicted that Democrats will fail to muster the six Republicans needed to break a filibuster.
“My focus has been to try to come up with a solution . . . to get us out of this impasse,” Collins said.
Her plan would reopen now-shuttered federal offices by funding the government for six months at an annual rate of $986 billion – the level proposed by Republicans and reluctantly agreed to by Democrats. It would also give federal agencies more flexibility to implement the forced sequestration budget cuts that began in March.
The sticking point for Democrats, however, is likely to be a proposed repeal of the health care act’s 2.3 percent tax on medical equipment and devices, offsetting the $30 billion loss through temporary pension plan adjustments for companies with fixed pension plans.
The majority of the Senate voted earlier this year on a budget amendment to repeal the medical device tax, but that was before House Republicans linked the Affordable Care Act to keeping the government open. Since then, Senate Democrats have rebuffed any attempted changes to the health care law.
Maine Sen. Angus King, an independent who caucuses with the Democrats, said he wasn’t sure he could support Collins’ plan.
“I think it’s a creative proposal and I’ve heard similar discussions in the House,” King said in an interview. “But what I have to get over is my concern that if we reward this kind of activity . . . we will be doing this a year or six months from now and it will become the norm for how we legislate. And that really bothers me.”
Collins said she has been approached by several Democrats interested in her plan, but acknowledged that no one has pledged support. A similar measure is under discussion in the House.
“I think they feel held back by leadership at this point,” Collins said of Democrats. “But I am hopeful that this bill provides at least concepts that could be the basis for reopening government and moving forward.”
Washington correspondent Kevin Miller can be contacted at 317-6256 or at:[email protected]