When Wednesday ends, the federal government won’t be able to go any further into debt until Congress gives its permission.
That permission will only be granted after several months of agonizing among Republicans, many of whom don’t want to increase the debt at all and want to start making real cuts to spending. In those months, Democrats will argue that Republicans are putting the U.S. at risk of default by not allowing more borrowing.
The debt ceiling has returned.
But unlike past debt crises, deficit hawks are hoping this new chapter ends differently — not with more unrestrained borrowing, but with some kind of commitment to reverse decades of habits that have allowed the national debt to hit $19.9 trillion.
President Trump’s election victory is giving conservatives hope, and the White House so far has indicated that it doesn’t want this debt crisis to go to waste.
“[H]ow we address our budget deficits, our debt and our spending going forward is something that is a holistic conversation that the [Treasury] secretary and [OMB] Director [Mick] Mulvaney and others, the president, the vice president, are engaging with Congress on,” White House spokesman Sean Spicer said Tuesday. He also said the budget Trump would release this week would reveal its approach to “fiscal responsibility.”
The White House has talked about putting the country’s “debt, deficit and budget in order,” but doing so will require Republicans to decide several key questions.
One is whether and how to tie spending reforms to an increase in the debt ceiling. Republicans have tried this before, most notably in 2011, when Congress passed a bill that led to the sequester. Those automatic cuts were hated by both Republicans and Democrats, and Trump himself has proposed a $54 billion bump in defense spending that will almost certainly be met by demands from Democrats to raise domestic spending.
That expected fight is likely to make it harder for deficit hawks to argue for restraint.
Another question is simply: how should the debt ceiling be raised?
The last few times around, Congress agreed to suspend the debt ceiling, which allows unrestrained borrowing for as long as the ceiling is suspended.
That’s what happened in late 2015, when Congress and President Barack Obama pushed the debt ceiling fight past the November election and into this week. Starting Thursday, March 16, whatever debt the U.S. has piled up will serve as the debt ceiling, and the continued operation of the federal government will depend on how well, and how long, the Treasury Department can reduce certain borrowing and otherwise juggle the books in order to prevent a default.
Those steps, which Treasury calls “extraordinary measures,” are expected to keep the government going through the late summer or early fall.
Treasury Secretary Steve Mnuchin has already asked Congress to consider raising the ceiling, and a Treasury official said that should be read as a request to raise the specific limit of debt allowed. That’s the way Congress used to do it before the last few years in which it suspended the ceiling.
“I encourage Congress to raise the debt limit at the first opportunity so that we can proceed with our joint priorities,” Mnuchin wrote.
But the path was unclear as of this week. Several congressional aides told the Washington Examiner that no decisions have been made on whether to suspend the ceiling again and let it grow as fast as it can, or set a firm new limit.
However the issue is resolved, Republicans may not have as much time as they’d like to sort it out. The Trump administration has been spending the government’s cash reserves at a rapid pace since it took over in January — it started with $382 billion, and as of Monday, $44 billion was left.
That spending appears to be an effort to comply with federal law, which says the government can’t build up a cash stockpile in order to survive a debt ceiling crisis.
The new debt ceiling is expected to be about $19.9 trillion, where it has hovered for months now, thanks in part to Trump’s decision to spend cash instead of taking on new debt. The White House claims Trump will show more fiscal restraint in the days and months ahead.
“Part of the reason that the president has addressed a budget the way he has is to try to get our nation’s debt deficit and budget in order,” Spicer said last week. “I think he’s continuing to show a tremendous respect for taxpayer money, the way we spend money…”
