U.S. Will Hit Debt Ceiling Earlier Than Expected
The Treasury Department reported to Congress yesterday that the United States will hit the currently set debt ceiling limit earlier than expected in mid-March, making the upcoming Federal budget and DACA deadlines even more important:
The Congressional Budget Office said on Wednesday that the United States is expected to bump up against its borrowing limit a month earlier than previously expected, a function of last year’s $1.5 trillion tax cut, which is resulting in less revenue for the Treasury Department.
According to the budget office, the borrowing limit will most likely need to be raised in early March after the “extraordinary measures” to extend borrowing employed by the Treasury secretary, Steven Mnuchin, are exhausted. The budget office previously projected that the debt limit would need to be raised beyond its current level of $20.5 trillion in late March or early April.
The reason for the change stems from the tax cuts, which went into effect in January and are expected to translate into less revenue for the federal government.
The Internal Revenue Service released new withholding tables this month to reflect the new, lower tax rates, which will result in companies withholding less money from worker paychecks. Beginning in February, the government is expected to see $10 billion to $15 billion less tax revenue each month.
The Trump administration has said that faster economic growth spurred by the tax cuts will eventually allow the cuts to pay for themselves. Mr. Mnuchin has acknowledged that the additional revenues will be backloaded over the 10-year budget window and that he does not expect to see an increase in government revenues this year.
On Tuesday, Mr. Mnuchin called on Congress to lift the debt limit by the end of February in order for the United States to borrow more money to pay its bills. He said that the trajectory of the national debt was something that concerns President Trump but dismissed suggestions by Democrats that the tax cut was only worsening the fiscal situation, saying that if economic growth can be sustained at an annual rate of 3 percent, the tax cuts will pay for themselves. (Macroeconomic Advisers, an economic forecasting firm, expects growth in the first three months of 2018 to fall to 2.3 percent.)
Congress suspended the debt limit last September as part of a deal brokered by Mr. Trump that was intended to help clear a path for the tax legislation to pass.
Agreement this time around will probably be more complicated, as lawmakers are also battling over a broader deal about the budget and immigration legislation. Government funding is currently set to expire on Feb. 8.
Some lawmakers have proposed abolishing the debt ceiling, arguing that it has failed as a tool to control government spending because it is routinely raised. Mr. Mnuchin, speaking at a Senate Banking Committee hearing on Tuesday, said that Mr. Trump would be open to changes to the debt ceiling.
Democrats seized on the Congressional Budget Office debt limit report on Wednesday as new evidence that the Republican tax bill was fiscally reckless.
“With full control of the House, Senate and White House, Republicans have revealed their contempt for fiscal responsibility and their utter incompetence in governing,” said Representative Nancy Pelosi of California, the House Democratic leader.
What all of this means is that we’ve got three deadlines coming up over the next month, and a limited amount of time for Congress to act. The first deadline, of course, is the Continuing Resolution that was passed to end the three-day shutdown two weeks ago. That’s just a week from today. The second deadline is March 5th, when the six month period set by the Trump Administration’s decision to end the Deferred Action For Childhood Arrivals (DACA) program, would hit. Now, we’ve got the debt ceiling deadline, which appears to be hitting at roughly the same time as the DACA deadline. Ideally, of course, Congress would deal with all of this at once, or at least relatively close together. For example, it makes the most sense to deal with the debt ceiling at the same time as you’re dealing with the budget since they basically involve the same issue. That would mean putting together a package that funds the government through the end of the Fiscal Year and raises the debt ceiling sufficiently to give the Treasury Department the borrowing authority it needs for at least the rest of the year. That would mean coming up with a combined budget and debt ceiling package by within the next week, though, and it’s not at all clear that the House and Senate will be able to deal with that.
With regard to DACA, the issue is vastly more complicated. As I’ve noted, the prospects for a DACA deal are by no means clear. As it stands, the differences between what can conceivably pass the Senate, which would basically consist of a bill that extended DACA and provided some funding for Trump’s border wall, and what would pass the House, which would apparently have to include not just border wall funding but also some provisions that have the potential to cut legal immigration by as much as 50% over ten years. The White House’s own proposal, which more than doubles the number of people eligible for the program in exchange for border wall funding and massive changes to the legal immigration system, isn’t even being well received by members of the President’s own party. This means we could get to the March 5th deadline without a solution to the DACA problem.
At that point, the estimated 700,000 people who have benefited from the program since President Obama set it up in 2012 could be subject to deportation. Whether that’s actually the case or not, though, on several factors. For example, the immigration authorities could decide not to prioritize the DACA beneficiaries in favor of concentrating on deportation proceedings against undocumented immigrants with criminal records, which is actually a sane policy. Second, President Trump could decide at the last minute to extend the program for some brief period of time to give Congress more time to work out an immigration deal. Finally, it’s worth remembering that the ruling handed down by a Federal District Court Judge in California placing a nationwide hold on enforcement of the September order from the Justice Department. As long as that injunction remains in place, it’s likely that at the very least the people currently covered by DACA would be safe and would stay in the same legal status they are now.
Complicating all of this is the Congressional calendar over the next month, which doesn’t exactly give Congressmen and Senators a lot of time to act. Congress is out of session for the rest of the week due to the annual Republican retreat, which was marked of course by yesterday’s tragic accident involving the train carrying Republicans and their families to the event. Democrats have their retreat next week. This means that there are only three working days on Capitol Hill between now and the budget deadline on February 8th, and a limited number of working days between now and the DACA and debt ceiling deadlines. Most likely, Congress will find some solution on the fiscal matters, even if it one that simply kicks the can a little further down the road with another Continuing Resolution, but that assumes that Democrats stick to their apparent pledge not to try to use the budget to force a DACA deal. If that happens, we could be in for some turbulence in Washington in the weeks ahead.