Mnuchin Call for Debt Hike by August May Presage Showdown

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By Jonathan Nicholson

Capitol Hill could see a pre-August legislative break showdown between hardline House Republicans and the White House over the congressionally-set limit on federal borrowing.

The House Freedom Caucus, a group of libertarian and conservative Republican House members, said May 24 it would oppose an increase in the debt limit that was not linked to major changes in federal spending. The group’s statement came not long after Treasury Secretary Steven Mnuchin told members of the House Ways and Means Committee he wanted to see the limit boosted without conditions before lawmakers leave for a five-week August break July 28.

While the Freedom Caucus said it agreed with raising the debt limit before the break, the actual urgency of that timeline was not clear, as Treasury had been seen previously as having enough borrowing room to get it well into the fall under the current debt limit.

Trillion Dollar Hike?

At their quarterly press conference May 3, Treasury debt managers said they had room with “extraordinary measures” to keep borrowing until sometime in the second half of 2017. Estimates by Wall Street economists who follow the debt closely and by the Bipartisan Policy Center had put the “drop dead” date sometime in October or November.

Also, Mnuchin has in the past said he wanted the debt limit dealt with well before the time the government could be forced to choose between making payments on its debt and other government bills or defaulting. At an April 26 event at the Newseum, Mnuchin said, “By the way, we are not going to do one of these ‘wait until the last-minute’ [boosts] either. So we’ll get the debt limit done in plenty of time so there’s no issues for the market.”

Mnuchin did not give a preference for how large an increase he preferred. In recent instances, though, lawmakers have tried to time the limit so it would not need to be raised again until an intervening presidential or mid-term election. In the 2018 White House budget issued May 23, a hike of almost $1.3 trillion would be needed to get to Sept. 30, 2018, a few weeks before the next mid-term elections. While debt ceiling boosts are always politically tricky, one of that size could be difficult to pass without bipartisan support.

Slower Receipts

Mnuchin made his plea for a hike during testimony before the House Ways and Means Committee.

“I would also like to emphasize for this committee and for the rest of Congress: I urge you to raise the debt limit before you leave for the the summer,” he said.

“We can all discuss how we cut spending in the future and how we deal with budgets going forward, but it is absolutely critical that, where we’ve spent money, that we keep the credit of the United States as the most critical issue,” he said.

Asked by Ways and Means Chairman Kevin Brady (R-Texas) whether he preferred a clean hike—unattached to changes in other federal policies—Mnuchin said, “That is my preference.”

At an earlier Capitol Hill hearing May 24, Mick Mulvaney, director of the Office of Management and Budget, appeared to suggest spring tax receipts were somewhat weak.

“My understanding is the receipts currently are coming in a little bit slower than expected,” he said.

Pelosi: It’s GOP’s Problem

“We have an obligation to the American people to tackle Washington’s out of control spending and put in place measures to get our country on the right fiscal course,” the Freedom Caucus said in its statement.

“In order to accomplish this end, the Freedom Caucus has taken a three-fold position: we oppose any clean raising of the debt ceiling, we call for the debt ceiling to be addressed by Congress prior to the August Recess, and we demand that any increase of the debt ceiling be paired with policy that addresses Washington’s unsustainable spending by cutting where necessary, capping where able, and working to balance in the near future,” the statement said.

The conditions set by the Freedom Caucus could cause another intra-party split between hardliners and moderates, similar to one that almost sank House Republicans’ health care repeal effort.

If that happened, Democrats could see an increase in their leverage if their votes were needed to get a debt limit boost enacted. House Minority Leader Nancy Pelosi (D-Calif.) praised Mnuchin’s stance in a statement.

“The Treasury Secretary is right: The Republican Majority should pass a clean debt limit increase and not risk the full faith and credit of the United States,” she said.

To contact the reporter on this story: Jonathan Nicholson in Washington at jnicholson@bna.com

To contact the editor responsible for this story: Paul Hendrie at pHendrie@bna.com

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