The next bite at the apple

THE NEXT BITE AT THE APPLE…. No one wants to hear this, but there are three moments for a budget crisis in 2011: wrapping up the current fiscal year, extending the debt limit, and next year’s budget. The first was wrapped up last night, and as ridiculous as this may sound, it was arguably the easiest of the three.

Last weekend, when the outcome of this week’s budget debate was still in doubt, a Republican congressional aide told Roll Call, “This is going to be nothing compared to the debt limit.” Or, as Sen. Kay Bailey Hutchison (R-Texas) told CNN yesterday, “The debt ceiling is going to be Armageddon.”

Last night, almost immediately after the agreement was announced, Senate Minority Leader Mitch McConnell (R-Ky.) expressed his satisfaction — and then mentioned the fight over the debt limit.

Oh, good.

Federal Reserve Chairman Ben Bernanke recently warned congressional Republicans not to “play around with” a coming vote to raise the government’s legal borrowing limit, adding that lawmakers shouldn’t view the debt ceiling as a “bargaining chip.” All available evidence suggests the GOP intends to ignore this advice.

And so, just as one fight ends, the next is right around the corner.

The federal government will exhaust its ability to borrow money under current law during the second week of July, the Treasury Department said in a letter sent Monday to members of Congress.

The government will hit the debt limit — the maximum amount that it can borrow — “no later than May 16,” the letter said; after that, “extraordinary measures” can create roughly eight weeks of wiggle room.

“The longer Congress fails to act, the more we risk that investors here and around the world will lose confidence in our ability to meet our commitments and obligations,” Treasury Secretary Timothy F. Geithner wrote in the letter, sent to leaders of both parties in the House and the Senate. […]

Mr. Geithner closed the letter on a dry note. “I hope this information is helpful as you plan the legislative schedule for the coming weeks,” he wrote.

We don’t yet know exactly what Republicans will want to prevent this global financial disaster. It’s tough to demand massive entitlement cuts, since that’s what they have in mind for the third round (the budget for the next fiscal year). There’s talk of demanding a balanced-budget amendment to the U.S. Constitution — one of the worst ideas in the history of the world — but that’s obviously too high a price.

But while we wait for the ransom note, keep in mind that Republicans know they’re playing with fire. House Speaker John Boehner (R-Ohio) recently said failing to raise the debt limit “would be a financial disaster, not only for us, but for the worldwide economy.” Sen. Lindsey Graham (R-S.C.) said failure to raise the debt limit would lead to “financial collapse and calamity throughout the world.” Fox News’ Charles Krauthammer said the consequences would be “catastrophic.” Fox News’ Dana Perino said Republicans are inviting “economic disaster.” George Will said policymakers would have to be “suicidal.”

At this point, it appears that Republicans know all of this, but don’t much care. They’re the hostage takers, they’re looking for “leverage,” and they think they’ve found it.

The fun never ends.