Debt Limit Warnings May Face Skepticism on Hill, With Reason

By Jonathan Nicholson

The Trump administration and House Speaker Paul Ryan (R-Wis.) may be agreed on wanting to deal with raising the debt limit by August, but if history is any guide, they’ll face skepticism from rank-and-file members on that urgency, perhaps with good reason.

In the past, Treasury secretaries of both parties have often been accused of overselling the need to raise the congressionally set debt ceiling, knowing lawmakers are likely to put off acting on it until absolutely necessary. This dynamic has led to a ritual in which the administration says early on that it needs an increase in the debt limit soon, lawmakers largely ignore the call, and the process is repeated until the Treasury gives a firm date on when it will run out of borrowing capacity needed to pay the government’s bills, and Congress grudgingly acquiesces.

That history was on display May 25, as Sen. Bob Corker (R-Tenn.) asked Mick Mulvaney, the director of the Office of Management and Budget, if the Treasury’s projections on when it would run out of borrowing room had changed.

“I know that administrations typically play this game with us, you know, to give some leeway. It always is X and then we move it up to Y so that there’s a little leeway in the event we don’t raise the debt ceiling. That may not be the case here. I’m just telling you what had happened in the past,” said Corker at a Senate Budget Committee hearing.

Changes Within Range

Mulvaney said Treasury Secretary Steven Mnuchin had told him recently tax receipts were coming in “a little bit more slowly” than Mnuchin had previously expected and thus the “drop dead” date for the debt limit had moved forward from sometime in September to August.

Mnuchin told the House Ways and Means Committee May 24 that he wanted the debt limit raised before lawmakers left Washington for a five-week break in August. He also said he wanted it done as a clean boost, without policy changes attached. He did not specifically say when he expected borrowing capacity to be exhausted.

One outside group, however, said it has not seen a deterioration in federal receipts that would make it revise its projection that the debt limit would need to be raised sometime in October or November.

“There have been some signs of revenues being lower relative to projections—in early May, CBO reported that federal receipts for the year overall have grown at a lower rate than expected, mostly due to lower individual taxes,” said Tim Shaw, senior policy analyst with the Bipartisan Policy Center. “Thus far, however, these changes have fallen within the range of our October/November projection, and preliminary tax revenues from May to date don’t indicate a shift large enough to change our range.”

Shaw said Treasury could have additional data on the accounting moves it is making to stay below the limit that could explain the calls to raise the limit by August. “The first week of June data will be released that includes the status of Treasury’s extraordinary measures, and we’ll have a better sense then of whether any changes warrant a change in our projection,” Shaw said.

‘Light a Fire’

Ryan himself has in the past also sounded wary of Treasury’s warnings. In October 2015, when the Treasury Department in the Obama administration said it would run out of borrowing room by Nov. 5, Ryan, then chairman of the House Ways and Means Committee, said, “They control the switch. They control the numbers.”

“It is what they say it is, because they control the time element,” he said.

WIth the Treasury Department under Republican control, Ryan said May 25 the issue will be resolved. “The timing is what I think is the newsworthy thing here. Receipts aren’t quite what people thought they were and that’s why Secretary Mnuchin is moving the timetable up. So we’re looking at that new timetable,” he said.

If the debt ceiling were dealt with before the August break, it would be one less issue cluttering lawmakers’ plates as they return to Washington to fund the government by Sept. 30 and possibly work on a tax system overhaul in the fall.

Nancy Vanden Houten, senior research analyst with Stone & McCarthy Research Associates, said her own projections of a “drop dead” date of early October remain unchanged after tax season data, but she could understand why Treasury may be pushing lawmakers to act sooner than actually needed.

“From Treasury’s perspective, I completely get the ‘sooner the better’ perspective and the desire to sound alarmist in order to light a fire under Congress. And there is enough uncertainty in cash flow projections to warrant concern that Congress will be out all of August and the first few days of September without having acted,” she said. “But in terms of my own projections – no big change.”

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