As you’ve probably heard, we have another debt ceiling battle coming in September and probably early October. This is nothing new – or is it? I will argue below that this year’s debt ceiling battle has the potential to be the most dangerous in decades.
For the past six months, Treasury Secretary Steven Mnuchin has repeatedly urged Congress to deal with the debt ceiling before leaving for their August recess, preferably without drama. Not surprisingly, he didn’t get his wish. Congress always waits until the last minute to resolve this.
That means the debt ceiling matter won’t be put to bed until late September at the earliest, and maybe not until early October. That also means when lawmakers return, they won’t have much time to act. This year’s delay in raising the debt limit is especially precarious.
Before I get into why this year’s debt ceiling battle is potentially so dangerous, let’s quickly review the basics. The US debt ceiling is the legislatively-imposed limit on the amount of national debt that can be issued by the US Treasury, thus limiting how much money the federal government can borrow.
The current debt limit is $19.85 trillion set back in March of this year. While the government has already spent beyond that limit, the Treasury has avoided a default by employing so-called “extraordinary measures” to continue to pay the nation’s bills.
However, Treasury Secretary Mnuchin has warned that these extraordinary measures will run out by late September or early October, at which time the risk of a government default is very real – especially this year.
So, what’s so different this time around? In three words: politics, partisanship and inexperience. It’s a little complicated, so let me explain.
First, the Trump administration is confounded by inexperience and infighting. Treasury Secretary Mnuchin has no expertise in orchestrating such a debt ceiling battle with all the players involved. Fortunately, he does understand the gravity of the situation and has lobbied for a “clean” debt ceiling bill — one without conditions or unnecessary amendments attached.
Yet that puts him in conflict with his White House colleague Mick Mulvaney, the director of the Office of Management and Budget and a founding member of the Freedom Caucus. Mulvaney has recently suggested that breaching the debt ceiling would not be that consequential, and he has argued that the must-pass legislation should be used to advance the hard right’s agenda.
Thus, we have two very different agendas on the debt ceiling within the Trump administration. Without a clear signal from the White House that the debt ceiling should not be held hostage to political agendas, it will be hard to get Congress to pass a clean bill.
And yet there’s another problem: Congress, and in particular, the Freedom Caucus. As the healthcare “repeal and replace” fight showed, the Freedom Caucus is fixated on cutting entitlement spending. It has made it clear that if the House leadership balks on their demands for major cuts in the 2018 budget, they’ll refuse to vote on raising the debt ceiling. Oh boy!
Finally, some conservative policymakers besides Mr. Mulvaney have convinced themselves that crashing through the debt ceiling won’t be a big deal because the government can “prioritize” its bill payments until the debt limit is eventually increased.
This is stupid thinking given that Secretary Mnuchin has clearly warned that this shell game can only continue until late September or early October, after which time the risk of a government default is very, very real.
I know we’ve been through such debt ceiling scares before, and I’ve written about them. In each case in recent decades, one political party or the other blinked at the last moment, and we got a hike in the debt ceiling just in time to avoid a default.
Yet this time around, it is competing factions within the Trump administration that are in disagreement, and the president has not indicated where he stands on the issue.
Meanwhile, the Democrats appear happy to sit back and watch as members of the Trump administration duke it out and threaten to shoot the nation in the foot. Frankly, I don’t blame them!
Finally and just to be clear, I don’t like raising the debt ceiling. I don’t like federal deficit spending. I truly wish we had a hard and fast balanced budget amendment. And I would love term limits on government elected officials.
But we are way past such policies and limitations, at least anytime soon. In the absence of such needed reforms, we need to increase the debt ceiling just ahead to avoid a government default on its debt. Ultimately, Congress must make this decision. And where are they? On vacation until September 5. What else is new?