Capitol to Capitol
An Information Service of NCSL's Standing Committees

Volumee 18   Issue 28 - July 29, 2011



Only days remain until the federal government will reach its $14.29 trillion debt limit on Aug. 2, leaving lawmakers scrambling to develop legislation that would both raise the debt ceiling and reduce the federal deficit. Two new competing plans were introduced early this week from Senate Majority Leader Harry Reid of Nevada and House Speaker John Boehner of Ohio. While both offered 10-year discretionary caps with savings of $1.2 trillion and would establish a 12-member committee to find additional savings, they diverged in the approach to raise the debt limit. Speaker Boehner’s proposal would cover the government’s borrowing until the end of 2012, but would force another vote to raise the debt before the 2012 elections. In contrast, Senator Reid’s proposal would reduce the debt by $2.7 trillion through cuts to discretionary spending and reductions from mandatory programs, winding down the wars in Iraq and Afghanistan and interest savings. After the Congressional Budget Office score determined the House plan would not meet its primary goal of cutting $1.2 trillion, the proposal was rewritten to ensure spending reductions would be more than the debt limit is raised and a vote is expected on the legislation Friday. With both Senator Reid’s and Speaker Boehner’s proposals unlikely to pass in their opposing chamber, negotiators will need to find a middle ground to determine when to raise the debt ceiling and by how much. Stay tuned. NCSL staff contacts: Michael Bird, Jeff Hurley.


A report by Moody’s Investor Services indicates the federal government may have company if it loses its AAA rating. Maryland, New Mexico, South Carolina Tennessee and Virginia have all been cited for possible downgrade, if there is a federal default and a corresponding change in the U.S. government rating. These states are deemed to have above average risk according to several risk factors Moody’s used, including employment volatility, federal procurement contacts as a percentage of state GDP and Medicaid as a percentage of total state expenditures. A press release of Moody’s announcement can be viewed here: Additionally, on July 28 Moody’s placed the ratings of 177 U.S. municipal issuers on review for possible downgrade, also largely attributable to a possible the U.S. federal government debt rating downgrade. The governments targeted include 66 cities and 53 counties with the largest number of local issues in Virginia and Massachusetts. NCSL staff contacts: Michael Bird, Jeff Hurley


The House will vote on two balanced-budget amendments in the coming days after the Senate rejected the “cut, cap and balance” bill (H.R. 2560) last week which linked the passage of a debt ceiling increase to a federal balanced budget. The two new proposals, H. J. Res 1 and H. J. Res. 2, would need two-thirds support to pass. H. J. Res. 1 is similar to the balanced-budget provisions in H.R. 2560 that would set spending limits as a percentage of GDP and require two-thirds vote on tax increases. H.J. Res. 2, on the other hand, is “clean” and therefore would exclude spending caps and supermajority needed to raise taxes. NCSL staff contacts: Michael Bird, Jeff Hurley


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