A new chapter has begun in the ongoing United States debt-ceiling debate. House Republicans, fresh off a private policy meeting in Virginia, announced on Friday that they will vote on a short-term increase to the federal borrowing limit.
The announcement sent a surge of optimism through the markets, pulling the Dow and S&P 500 back to the brink of positive territory after trading low all morning. The NASDAQ remained weighed down by Intel’s (NASDAQ:INTC) post-earnings drop, but also pulled back from intraday lows to settle at just marginal losses.
The Republican proposal would increase the government’s borrowing limit just enough to finance operations through mid-April. This gives Congress a little more breathing room beyond the current deadline for default, which is either late February or early March, depending on how long the Treasury’s extraordinary financing measures last. Republicans want to use this time to pass a budget.
What’s particularly interesting is the commitment device that the GOP built into their bill. Previously, Congress built in the fiscal cliff to force themselves to make a deficit-reduction decision (and that worked out really, really well). This time, if Congress doesn’t adopt a budget by April 15, then they won’t get paid…