U.S. Congress may face another debt-limit showdown in 2013

Sun Oct 28, 2012 2:27pm EDT
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By Richard Cowan and Rachelle Younglai

WASHINGTON (Reuters) - A U.S. debt-ceiling increase could be headed for a Wall Street-rattling showdown in 2013 if Congress, as expected, shuns a quick and easy fix at the end of this year in favor of another round of last-minute brinkmanship.

Regardless of who wins the November 6 elections, many congressional aides and Capitol Hill observers are predicting that lawmakers will go right up to the deadline - probably around mid-February or early March - before increasing the $16.4 trillion limit on borrowing that is nearly exhausted.

While no one is certain of another 11th-hour fight in February or March, no one is ruling it out.

Without the bigger government credit card, the U.S. Treasury Department no longer would be able to finance government operations, forcing widespread shutdowns and default on debt payments to creditors from China to England.

It is a scenario almost exactly like the summer of 2011 when investors, credit-rating agencies and capitals around the world watched with alarm as Washington went to the brink before reaching a debt-limit and deficit-reduction deal.

Another such showdown is "always a possibility," a Republican staffer said, even though there will be an opportunity to head it off early in a post-election "lame-duck" session of Congress set to begin on November 13.

That session will be focused mainly on trying to clean up another big mess Congress has created over a series of imminent tax increases and spending cuts - known as the "fiscal cliff" - that could throw the U.S. economy back into recession if allowed to happen.

"A lot of people (in Congress) don't want it (the debt-limit increase) to be part of the lame duck," the aide said. "For many people, the situation is complicated enough as it is" with the budget and tax decisions. "So why not take one component out of the equation," the aide added.   Continued...