Rep. Chris Van Hollen, D-Md., ranking minority member on the House Budget Committee, is worried there will be a replay of the 2011 debt limit debacle this year, which compromised the credit rating of the U.S. for the first time in history and halted sales of state and local government series securities for municipal bond issuers.
Speaking at the Bloomberg Washington Summit Tuesday, Van Hollen said he is concerned that despite House Speaker John Boehner's best intentions to avoid a debt ceiling fight, he isn't certain the Speaker can round up enough votes, especially from Tea Party Republicans, to raise the limit.
"I think they would like to avoid it but they don't know how," Van Hollen said. "And so they've come up with, at least for now, this cockamamie idea that you're somehow going to pay some of your bills but not all of your bills - they call it debt prioritization."
Earlier this month the Republican-controlled House Ways and Means Committee passed a measure, the Full Faith and Credit Act, which would pay Treasury public bondholders first if the U.S. hit the debt ceiling and Congress didn't raise the limit in order to avoid a default. It's unlikely this bill would pass the Democrat-controlled Senate.
Van Hollen said the U.S. will technically hit the debt ceiling on May 18 but due to Treasury Department accounting techniques it probably won't be until early fall when the U.S. government faces the prospects of defaulting on its debt. President Obama signed legislation on Feb. 5 to suspend the $16.4 trillion debt limit through May 18.
"I'm very nervous that despite what I think are the Speaker's good intentions to avoid a showdown, he can't see his way to putting on the table a decent way out," Van Hollen said.
In August 2011, Congress took until the 11th hour to finalize an agreement to raise the debt ceiling which ultimately rattled world markets, led Standard & Poor's to downgrade the U.S. rating to AA-plus, and Moody's Investors Service and Fitch Ratings to give the nation's AAA rating a negative outlook.
The actions increased the federal government's borrowing costs by $1.3 billion in 2011 alone, according to Gene Dodaro, the comptroller general of the Government Accountability Office who spoke at the summit.
Goldman Sachs recently released a report that contends raising the debt limit this year will be more difficult than in February primarily because Republicans the last time focused the spending debate on sequestration instead of the debt ceiling. Republican leaders now need to present their members with new justification for raising the debt ceiling, the firm said.
Van Hollen also noted during the conference that investment in infrastructure is a "no brainer" and needs to happen now to create jobs and repair crumbling roads.