Furloughed federal employees have permission to return to work as Congress reached a last-minute deal Wednesday night to raise the debt ceiling and end the government shutdown.
President Barack Obama signed the bill Thursday morning, ensuring the conclusion of the 16-day federal shutdown.
“Hopefully next time, it will not be at the 11th hour,” Obama said to reporters at the White House.
That next time might be sooner than what many hope for, as the bill extends current spending levels until Jan. 15 and allows the Treasury Department to enact “extraordinary measures” that effectively extend the debt ceiling until Feb. 7.
The bipartisan measure passed overwhelmingly in Congress, with an 81-18 vote in the Senate and a 285-144 vote in the House.
Tea Party Republicans such as Sen. Ted Cruz, R-Texas, drew heat from much of the American public due to their attempt to defund the Affordable Care Act, commonly known as Obamacare, by allowing a government shutdown and refusing to increase the debt limit.
Sen. John McCain, R-Ariz., was one of 27 Republican senators who voted in conjunction with Democrats to pass the bill and criticized Cruz and others’ efforts.
“It was the wrong ground, it was the wrong premise, it was the wrong fight to have,” McCain said to CNN’s Anderson Cooper. “I fought against Obamacare and continue to because I don’t believe it’s good for America. To sell to the American people that we can defund Obamacare when you control only one of the three branches, of executive and legislative, is a fool’s errand.”
An Oct. 13 Pew Research Poll showed 49 percent of Americans have an unfavorable opinion of the Tea Party, a near doubling of its 25 percent unfavorable rating in 2010.
Standard and Poor’s estimates that the federal government shutdown cost the economy $24 billion, while the temporary ceasing of a potential government debt default caused the Dow Jones Industrial Average to boost more than 200 points Wednesday.
The bill largely leaves the status quo in place, as it barely touches Obamacare and does not address any major spending changes to potential military funding or entitlement reform. This leaves the possibility of another debt ceiling debate next year as the United States approaches the new Feb. 7 deadline.
CMU prof: Debt a long-term problem
Central Michigan University Economics Chairman Paul Natke said federal debt poses a long-term problem.
Natke said the U.S. federal government is viewed as a preferred borrower because unlike regular people, it can acquire funds through processes like taxation and money creation. Because of this, a process known as “crowding out” occurs.
In crowding out, the preferred borrower – in this case, the government – increases its quantity of borrowed funds, thus leaving less for the private sector.
This process also drives interest rates up for the private sector, which Natke said was a major concern when Congress and former President Bill Clinton achieved a budget surplus in the ’90s.
“If interest rates rise, it’s going to curtail spending by businesses for capital improvements, renovations and expansion,” Natke said. “As that becomes more expensive, they will do less of it and it is that investment spending that fuels long term capacity to produce goods and services.”
A September report by the Congressional Budget Office, a nonpartisan agency that provides economic data for Congress, said there were even more concerns with prolonged deficits, such as the United States’ present near-$800 billion deficit.
It revealed federal spending on interest payments and the risk of a future financial crisis would increase, in addition to granting the government less financial flexibility for potential wars or economic downturns.
However, as evident by the recent debt ceiling debacle, deciding what to cut and when is a different matter.
“We can all agree that government spending needs to be curtailed,” Natke said. “But we’ll probably all disagree on what programs and items should be.”