The Trump administration has asked Congress to raise the federal debt ceiling before lawmakers leave for their August break. But that deadline could be difficult for Republicans who are under pressure to deliver results on healthcare and tax reform, and who are divided among themselves over whether they need to cut spending as a condition for raising the ceiling.
The latest chapter of the debt ceiling saga will be the first in years to be steered by Republicans in Congress and the White House. But while November's election victory for Republicans led to expectations of a new way of addressing the issue, Treasury Secretary Steve Mnuchin started the process by asking something that President Obama had routinely requested in the past: a "clean" increase in the ceiling with no strings attached, to ensure the government could keep on borrowing.
On March 16, Washington reached the end of an 18-month period in which it had suspended the debt ceiling, meaning it could borrow whatever it needed without worrying about limits. Once that ended, the total amount of government debt, $19.486 trillion, became the new ceiling.
The Treasury Department immediately took steps to reduce borrowing to keep the government from breaking through the ceiling. But Treasury can juggle the books for only so long, and is expected to require a higher ceiling by the fall.
"My strong preference is for the House and the Senate to address this as soon as possible," Mnuchin told a Senate Budget Committee hearing, "and my preference is for you to do this before you leave for the August recess."
But while Republicans in the Senate are weighing a debt ceiling vote in July, the issue has not reached the top of the House GOP agenda.
Senate Republicans are desperate to pass a healthcare reform bill in time to send it to the House before their summer vacations. They also are hoping to repeal and replace Obamacare and get that huge issue off their plate so there is time to tackle comprehensive tax reform, which ties with healthcare as a top GOP priority. Senate Republicans may vote on a bill this week, but it would then also need to be agreed by the House GOP in the coming weeks.
It complicates matters further that House GOP lawmakers are also pondering a summer vote on appropriations for the next fiscal year. President Trump has requested spending in fiscal 2018 that is far higher than caps imposed by the Budget Control Act of 2011. The request for defense spending, for example, is $603 billion, $54 billion more than the caps allow.
Appropriators want to spend even more than that, which will need another budget deal akin to previous two-year deals. That can't be done unless Republicans and Democrats work together. Democrats, however, demand a dollar of extra non-defense spending for every extra dollar that goes to the Pentagon.
So, talks about the debt ceiling have excluded discussion about appropriations at the same time, lawmakers said.
"Some people said we've got to throw the debt limit in somehow," Rep. Mike Simpson, R-Idaho, a leading appropriator, told the Washington Examiner. "But it really wasn't part of the overall discussion."
Once Republicans find time for the issue, they're likely to disagree with each other about how to proceed. They've always been split on how to tackle the rapidly growing federal debt, and now that the GOP has full control of Washington, conservatives expect more than the business-as-usual move of raising the ceiling.
Conservatives are demanding long-promised spending cuts to restore Washington's long-term fiscal stability — which was nothing more than a pipedream during the big-spending Obama administration.
"The U.S. federal government is drowning in debt, yet continues to spend into oblivion on the backs of future taxpayers," members of the conservative House Freedom Caucus said in a statement. "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."
Last time around, in 2015, most Republicans balked at raising the debt ceiling and boosting spending. The debt ceiling was suspended in October 2015, which effectively allowed an open-ended increase. It was part of a deal passed mostly with Democrats that allowed spending in fiscal 2017 to exceed statutory caps for both military and non-military activities.
Only 79 of the GOP's 246 lawmakers voted for it, which raises the question of whether Republicans in the House can pass anything along the lines of Mnuchin's request.
Some Democrats and Republicans are calling for another bipartisan deal, perhaps one that wraps in an agreement on 2018 budget caps, which would set federal spending levels for the next fiscal year. That agreement could give lawmakers assurances about total spending levels when they're being asked to agree to a debt ceiling hike.
"We ought to enter into a bipartisan budget agreement and tie the debt ceiling to that before the end of July," Rep. Charlie Dent, R-Pa., told Mnuchin at a House Appropriations Committee hearing. "I think that would be extremely important to provide not only stability for the markets, but budgetary stability of for all of us. I suspect it would get a lot of bipartisan support for many members on both sides of the aisle on this committee. I'm not saying everybody, but a lot."
Both parties have grown weary of end-of-year fiscal chaos forcing them to stuff many individual spending bills into one large appropriations measure, which both chambers rush to pass as the federal government verges on a partial shutdown. Agreement on an overall spending number would greatly reduce the chances of a showdown.
"For once, let's get ahead of the game, do the budget agreement now that will let us do our work and avoid that kind of destabilizing scramble at the end of the fiscal year," said Rep. David Price, D-N.C.
Senate Majority Whip John Cornyn, R-Texas, endorsed an "earlier" vote on the debt ceiling that includes a deal on the budget.
"I'm hoping there will be a negotiation on spending caps," Cornyn said. "Maybe it will be part of that."
But the question remains: What would the budget deal look like, and can it be fiscally hawkish enought to persuade Republicans to raise the debt ceiling?
The Trump administration also seems split. Trump has signaled he would defer to Mnuchin on the debt ceiling, and Mnuchin does not want to mix the issue with budget matters, fearing it will entangle the need for a ceiling hike in a protracted political fight.
But Mick Mulvaney, Trump's budget director, a long-time deficit hawk, wants to link any debt ceiling increase to a budget deal that includes spending cuts. His position could open the door to the Trump administration taking something more than just a clean increase.
The 2015 deal that raised the $18.1 trillion debt limit included cost-reducing reforms of the Social Security Disability Insurance program. Mulvaney and many conservatives will likely seek similar reforms this time around.
Mulvaney told the Washington Examiner he would "like to see things attached to it that drive certain spending reforms and debt reforms in the future."
Some lawmakers are already sure that some kind of language beyond a clean increase will be needed. Sen. Roger Wicker, R-Miss., laughed at Mnuchin's proposal to raise the debt ceiling unconditionally.
"Normally, we try to get something in return," Wicker said. "It should be used in a way that helps us address the debt issue long term."
Meanwhile, Democrats have indicated they will want to rope in other issues, such as tax reform, as they consider the debt ceiling, complicating the issue even further.
Senate Minority Leader Chuck Schumer, D-N.Y., did not rule out a broader deal, but he put Democratic cooperation on the debt limit in doubt last week, threatening to withhold support if Republicans try to cut taxes on high earners as part of their tax overhaul plan.
"If they're going to put on a massive tax cut for the very wealthy that increases the deficit by trillions, it's harder to get Democrats to increase the debt ceiling," Schumer said.
There are some technical questions that Republicans need to decide, such as whether to raise the debt ceiling, or suspend it again.
The idea of suspending it evolved under Obama, and it allowed Republicans to get around the problem by pushing it further into the future. That allowed the government to spend whatever it needed without forcing Republicans into an embarrassing vote to increase the national debt.
That's how the government got its current level, $19.846 trillion.
But if Republicans are in the mood to be stingy, they could decide to set a specific limit above which the government could not borrow more. The GOP has not given any indication which way it will go.
Republicans plan to take on tax reform in earnest when they return to Capitol Hill after the August recess, but this could clash with a debate over the debt limit if that too is left unsettled until September.
Republican leaders haven't signaled how - or when - they plan to deal with the national debt, even though Mnuchin warned lawmakers that an unexpected reduction in tax receipts will mean the Treasury could run dry sooner.
The GOP's lack of urgency stems from the Treasury's tradition of reducing borrowing and taking other steps to prevent the government from hitting the limit. After asking for action by August, Mnuchin later clarified that he can use these so-called "extraordinary measures" to give Congress more time.
"We do have plans," Mnuchin told a Senate Budget Committee hearing. "If you don't do it beforehand … we can fund the government through September, when you get back."
But Mnuchin advised lawmakers that waiting until the last minute could have economic consequences and would threaten instability in capital markets.
"I urge, given the importance of this, that we send a message to the rest of the world and to the markets that we take our credit very seriously," Mnuchin said.