WASHINGTON — The White House is once again asking Congress to increase the federal borrowing limit by $1.2 trillion to avoid hitting the nation’s debt ceiling, but the request is sure to trigger another battle on Capitol Hill and possibly threaten the availability of sales of state and local government series securities to municipal issuers.
President Obama sent a letter to House Speaker John Boehner R-Ohio., and Senate Majority Leader Harry Reid, D-Nev., on Thursday notifying them that federal debt is within $100 billion of the statutory ceiling. “Further borrowing is required to meet existing commitments,” the president wrote.
If Congress approves another increase, the debt limit would not likely be reached again until after the November presidential election. Last August, the administration and Congress reached an agreement to raise the borrowing limit by $2.1 trillion in three separate steps after a prolonged battle and much negotiation.
“Washington’s mounting debt is a drag on our economic recovery, and this request is another reminder that the president has consistently punted on the tough choices needed to rein in the deficit and protect important programs for American seniors from going bankrupt,” said Brendan Buck, Boehner’s spokesman.
Congress has 15 days to reject the president’s request.
The House plans to vote on a resolution of disapproval next Wednesday after it returns from recess, said a spokesperson for House Majority Leader Eric Cantor, R-Va.
The resolution is expected to be approved, sources said.
Meanwhile, the Senate plans to vote on a similar resolution next week, and it is expected to fail.
With Democrats and Republicans once again at loggerheads over the issue, the Treasury Department may be forced to implement a series of financial and bookkeeping maneuvers to buy additional time before facing the prospect of a default.
One of the first steps Treasury typically takes is to stop issuing SLGS, which issuers selling advance refunding bonds typically buy to put in escrows until their bonds can be refunded.
The Treasury has closed the SLGS window seven times in recent years to avoid reaching the debt limit and to give Congress additional time to raise the limit.
Many state and local municipal issuers of advance refunding bonds buy SLGS for their escrows because their maturities can be specially tailored to match those of the bonds being refunded. SLGS help muni issuers avoid violations of arbitrage restrictions, which would occur if their investment yield exceeds their bond yield.
The SLGS program was established in 1972 and has been modified several times since then.