Aaron Schock

Debt Limit Resources

Budget Control Act of 2011

Congressman Aaron Schock (R-IL) issued the following statement today after the House of Representatives passed the Budget Control Act of 2011: 

“The passage of the Budget Control Act represents a serious shift in the mindset of how Washington has approached raising the debt limit. Congress has rightly focused this debate on how much to cut, instead of how much to spend. This year began with the President’s call on Congress to raise the debt limit by $2 trillion with zero cuts. The President was also insistent on raising taxes. I joined with a majority of my colleagues to focus on cutting spending as opposed to increasing revenue. As a result, the bipartisan legislation cuts trillions of dollars from the debt, doesn’t raise taxes and takes serious steps toward a path of fiscal solvency. This bill also focuses on the critical vote of a balanced budget amendment, which is an important aspect to fixing our problem for the longer term.

“While this has been a frustrating and lengthy process, I think the finished product is something to be proud of. It’s not perfect. In fact, it’s far from perfect, but with divided government neither side gets everything they want. A great number of Republicans and Democrats who joined together in support of this legislation is evident of its support. This bill continues to put our government on track for the first time since World War II  to spend less than the previous year.

“America still has a debt crisis, but tonight was a step in the right direction toward putting our budget back on a path of fiscal solvency.”

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Background on Budget Control Act of 2011

The non-partisan Congressional Budget Office (CBO) has stated that the Budget Control Act would reduce our debt by over the next decade by at least $2 trillion.

For the first time in fifteen years, the House and Senate are guaranteed to vote on a balanced budget amendment. In 1996, the BBA failed in the Senate by only one vote. Since then, the debt has grown by $9.2 trillion.

The amended Budget Control Act of 2011 is not the ultimate solution to the nation’s spending-driven debt crisis, but it accomplishes the following three objectives:
• Cutting spending by a larger amount than the amount to raise the debt limit;
• Capping future spending to limit the growth of government, without any job-killing tax hikes;
• Guaranteeing the American people a vote in the House and Senate on a balanced budget amendment.

Click here to read the Budget Control Act of 2011
Click here to read an outline of the amended Budget Control Act

Summary of the Budget Control Act of 2011

Cutting Discretionary Spending
• Reduces discretionary spending by $918 billion immediately and reducing the debt by over $2 trillion over the next decade.

Capping Discretionary Spending
• Discretionary spending is capped each year for the next decade. If the spending caps are exceeded there is an across the board cut (known as a sequester) of discretionary spending (with a permissible exemption for military pay) to eliminate the excess spending.
• The discretionary caps are codified in law and can only be changed by enactment of future legislation.

Joint Select Committee on Deficit Reduction
• Creates a 12-member Committee tasked with developing recommendations to reduce the deficit by $1.3-1.5 Trillion over 10 years.
• The Speaker, House Minority Leader, Senate Majority Leader, and Senate Minority Leader will each appoint 3 members.
• The Committee is required to report by November 23, 2011. 
• Each House is required to consider the Joint Committee’s recommendations by December 23, 2011.  In the Senate, the bill is not subject to filibuster.

Balanced Budget Amendment
• Requires each Chamber to consider balanced budget amendments to the Constitution between October 1st and the end of the year.
• Should an Amendment achieve the necessary 2/3rds in either chamber, the remaining chamber would be required to consider that Amendment.
Note: Before the President can request the second tranche of debt authority, the Select Committee must produce spending cuts larger than the hike and a Balanced Budget Amendment must be sent to the states.

Debt Limit Increase
• Upon enactment of the cuts contained in this bill, the President can exercise authority to increase the debt limit by $900 billion (of which $400 billion is available immediately). This authority is subject to disapproval in Congress.  If a disapproval is enacted, the $400 billion increase is paid for through an across the board spending cut.
• If the recommendations of the Joint Committee to reduce the deficit are enacted, the President may exercise authority to again increase the debt limit by up to $1.6 trillion. This authority is also subject to disapproval in Congress.
• In all cases, the debt limit increase is smaller than the total reduction in spending.

Additional Resources

A Step Forward, but a Long Journey Remains
By Paul Ryan

Video: Speaker Boehner's Address to the Nation on GOP Plan to Address America's Debt Crisis

Debt Limit Resources

As you are probably aware, the national debt ceiling is the maximum amount of debt that the federal government can take on. Congress must vote to raise the debt ceiling if the debt exceeds the limit, and since 1996, it has done so 11 times. Under President Obama and the previous House majority, the debt limit was raised 4 times, from $9 trillion to its current $14.3 trillion, a staggering $5 trillion increase in under 3 years. This current debt load is holding back economic recovery. The President’s own economic advisors have estimated that our current debt levels are causing a 1% drag on our economy, and that an increase of just 1% in GDP could create upwards of 1 million jobs.

On May 16, 2011, the debt limit was again reached, and Congress has until the beginning of August to address the issue before the United States Treasury will be unable to cover its expenses.

On May 31, 2011, the House took up H.R. 1954, which would have raised the federal debt limit over $2 trillion with no measures to reduce future spending. I voted against this legislation. It is now clear that meaningful spending reductions and reforms must be included along with any increase in the debt limit. Attaching spending reduction measures to debt limit increases is not unprecedented; in fact it has been done three times before.

Raising the debt limit is a short-term necessity to prevent serious negative consequences if Treasury defaults on its debt. These negative effects would be felt throughout our still-fragile economy, causing a dive back into deeper recession. Economists have estimated that a default on debt by the Treasury would cause the stock market to plunge 3,000-5,000 points, decimating working Americans’ pensions and retirement savings. In addition, the Federal Deposit Insurance Corporation (FDIC) gets the funds it uses to insure banks from failure from the U.S. Treasury. Under normal circumstances, FDIC insures each bank account holder for up to $250,000 of their savings, ensuring that people do not lose all of their savings if their bank fails. If the debt limit is not raised, Treasury will be unable to provide FDIC the funds needed to insure banks, leaving the savings of millions of Americans vulnerable.

Raising the debt limit without budget reduction measures included amounts to condoning the current spending spree in Washington and will only lead to more increases in spending and debt, destroying jobs and putting a drag on economic recovery. I cannot support such an affirmation of the status quo, and will continue to work with House leadership and my colleagues for meaningful spending reductions before considering any increase in the debt limit.

Additional Debt Limit Resources

Debt Limit Analysis
Source: Bipartisan Policy Center

The Gang of Six Budget Effort
Courtesy of Congressman Paul Ryan, House Budget Committee Chairman