The Roundtable and 13 other national real estate organizations this week urged congressional leaders to raise the debt limit as soon as possible. The joint letter noted that the possibility of inaction could agitate the stability of U.S. financial markets, and policymakers should avoid roiling significant sectors of the American economy unnecessarily. (Coalition letter, March 29)
August X Date
- The debt limit, which puts a statutory cap on the amount of debt outstanding and the ability to issue securities to fund the government’s obligations, was reached when the government hit its $31.4 trillion borrowing limit early this year. Treasury Secretary Janet Yellen informed House Speaker Kevin McCarthy in January that the U.S. would begin taking “extraordinary measures” to pay its bills. (Yellen letter, Jan. 19)
- The so-called “X date,” when the U.S. will be unable to meet all its financial obligations, looms as policymakers search for consensus on raising the debt ceiling. (NPR, Feb. 17)
- Mark Zandi, chief economist of Moody’s Analytics, told the House Budget Committee this week that Treasury’s extraordinary measures are likely to be exhausted this summer—and if the debt limit is not increased, the blow to the economy would be devastating. (Zandi’s written testimony, March 29)
- “As we approach that so-called X date in mid-August, pressures in the financial system are going to build,” Zandi said. “And as we can see from recent events, given the banking crisis, the system is very fragile at this point-in-time and adding the debt limit as an issue for investors would be particularly inopportune.”
Real Estate Markets Susceptible
- The real estate coalition’s letter this week emphasized that housing and real estate markets are particularly susceptible to any instability stemming from concern about the U.S. meeting its financial obligations, given that more than $10.3 trillion in mortgage debt is backed by the federal government through Fannie Mae, Freddie Mac, Ginnie Mae, and other federal agencies.
- The 14 industry organizations informed Senate and House leaders that bipartisan negotiations should pursue solutions as part of the budget and appropriations process. “We have no collective preference for the manner or legislative vehicle you use to resolve this critical issue and protect the full faith and credit of the United States,” according to the joint letter.
Policymakers & the Debt Ceiling
- Republicans have expressed interest in using some elements from a sprawling energy bill as part of debt ceiling negotiations. Certain measures in the bill, such as streamlining the permitting process for energy projects, have attracted support from both parties. (Bloomberg, March 30 andThe Hill, March 29)
- Yesterday, the House of Representatives passed the bill, which is focused on fossil-fuel measures, with four Democrats joining all but one Republican. Senate Majority Leader Chuck Schumer (D-NY) has called the overall bill dead on arrival in the Senate, but has expressed interest in striking a deal on permitting reform. (Reuters and CBS News, March 30)
- The chairman of the House Budget Committee, Rep. Jodey Arrington (R-TX) said this week that it could take months for Republicans to complete the budget process. “The more urgent matter is to address the debt ceiling and negotiate spending limitations and broader fiscal reforms in the process,” Arrington said. (Roll Call and Wall Street Journal, March 29)
As Congress began its two-week recess yesterday, with no votes scheduled until April 17, the White House released fact sheets to show the impacts of Republican requests for spending limits. (White House, March 30)
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This week, the nonpartisan Congressional Budget Office (CBO) reported that the government would exhaust its ability to borrow using extraordinary measures between July and September if Congress fails to raise the $31.4 trillion debt limit. (CBO, Federal Debt and the Statutory Limit, Feb. 15). (Washington Post, Jan. 15)
- When the U.S. reached the current debt limit in January, Treasury Secretary Janet Yellen notified congressional leaders of the implementation of so-called “extraordinary measures” to avoid a default, such as suspending the reinvestment of federal employees’ retirement plans. (Roundtable Weekly, Jan.13) (Yellen letter, Jan. 13)
- While the CBO noted these measures are expected to last until at least July, it also highlighted the difficulty in determining an exact date of default. The projected exhaustion date is uncertain, CBO notes, because the timing and amount of revenue collections and outlays over the intervening months could differ from current projections. (The Hill, Feb. 15)
- Thus far, discussions between the Republican-led House, Democratic Senate, and Administration have generated little, if any, progress towards a resolution. The new warning from the nonpartisan CBO reinforces the urgency for congressional leaders to reach an agreement to avoid a default. (Politico, Jan.15)
- In January, Real Estate Roundtable Chair John Fish (Chairman and CEO, SUFFOLK) and President and CEO Jeffrey DeBoer called on Roundtable members to proactively reach out to federal lawmakers to urge that they act expeditiously to raise the debt ceiling. “We now believe the risk of a default on the federal debt in 2023 is a real and meaningful concern that must not be taken lightly.” (Roundtable Weekly, Jan. 20)
- “Some threats to the U.S. economy are unavoidable, others are ones of our own making and entirely unnecessary. The potential for a default on the federal debt is a needless and inexcusable risk with potentially dire consequences for U.S. real estate, workers and retirees, and the entire economy,” said DeBoer. “The full faith and credit of the United States government should not be open to negotiation.”
Roundtable leaders continue to strongly encourage members to contact policymakers in Congress and the White House and appeal to them to raise the debt ceiling soon.
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The Real Estate Roundtable yesterday urged its membership—leaders of the nation’s top publicly held and privately owned real estate ownership, development, lending and management firms—to contact federal lawmakers to raise the nation’s debt ceiling. Treasury Secretary Janet Yellen said the U.S. reached the maximum amount it can legally borrow yesterday, and that “extraordinary measures” would allow the country to continue paying its bills, but only until early June. (NPR and Yellen letter to House Speaker Kevin McCarthy, Jan. 19)
- In the all-member Call-to-Action, Roundtable Chair John Fish (Chairman and CEO, SUFFOLK) and Roundtable President and CEO Jeffrey DeBoer wrote, “We now believe the risk of a default on the federal debt in 2023 is a real and meaningful concern that must not be taken lightly.” Congress has faced this statutory limit on debt 78 times in the past, yet has always acted to increase the debt limit. The note expressed their concern that Congress will face more difficulty in reaching an agreement on the debt ceiling now amid a substantial increase in political acrimony.
- Today, DeBoer said, “Some threats to the US economy are unavoidable, others are ones of our own making and entirely unnecessary. The potential for a default on the federal debt is a needless and inexcusable risk with potentially dire consequences for U.S. real estate, workers and retirees, and the entire economy. The full faith and credit of the United States government should not be open to negotiation.”
- Federal Reserve economists believe a prolonged stand-off could cause private interest rates to rise sharply, create liquidity pressures, and severely impair financial markets. “As default risk rises, the impacts will be felt throughout the economy, but especially in borrowing-intensive industries such as real estate,” the Call-to-Action added.
- The Roundtable note encourages its members to contact both policymakers in Congress and the White House to raise the debt ceiling soon.
Policymaking in the 118th Congress and significant challenges such as the debt ceiling will be discussed during The Roundtable’s State of the Industry Meeting next week in Washington, DC.
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The U.S. House of Representatives yesterday passed the Bipartisan Budget Act of 2019 (H.R. 3877) that would suspend the national debt ceiling until July 31, 2021; raise federal spending over the next two years; and avoid the threat of automatic, across-the-board “sequestration” budget cuts. The bill now goes to the Senate, which is expected to vote next week. ( Section-by-Section summary of the bill, Budget Committee)
The U.S. House of Representatives yesterday passed the Bipartisan Budget Act of 2019 (H.R. 3877) that would suspend the national debt ceiling until July 31, 2021; raise federal spending over the next two years; and avoid the threat of automatic, across-the-board “sequestration” budget cuts.
- The measure, which passed 284-149, caps recent negotiations between Democratic congressional leaders and the White House. Earlier this month, Treasury Secretary Steven Mnuchin wrote to House Speaker Nancy Pelosi (D-CA) warning that if the debt ceiling was not raised, the U.S. could run out of cash to pay its bills in early September, resulting in potential default on the nation’s financial obligations. (Roundtable Weekly, July 12)
- The deal increases discretionary spending limits $324 billion over two years, replacing the prospect of strict sequestration caps imposed under the Budget Control Act of 2011. The bill passed by the House permanently ends sequestration, which would impose a 10 percent cut on all programs if budget targets are not met. (CQ, July 25)
- The fiscal package passed by the House would increase the budget cap for FY’20 defense programs by three percent, to $738 billion. Funding for domestic programs would increase four percent, topping off at $632 billion. (Politico, July 25)
- The deal also lifts the debt limit through July 2021, meaning policymakers would not have to address the controversial issue during the 2020 election year.
- President Trump encouraged GOP lawmakers to endorse the legislation, tweeting yesterday, “House Republicans should support the TWO YEAR BUDGET AGREEMENT which greatly helps our Military and our Vets. I am totally with you!”
- Senate Majority Leader Mitch McConnell, (R-KY) this week stated he expects the Senate to pass the House bill next week and send it to President Trump for his signature. (Washington Post, July 25). He added, “I make no apologies for this two-year caps deal. I think it’s the best we could have done in a time of divided government. The alternatives were much worse.” (Politico, July 23).
- When Congress returns from summer recess on September 9, policymakers will face a tight deadline to set federal appropriations for individual agencies and departments for FY’20. Current FY’19 funding runs out on September 30, as does legislative authority for the National Flood Insurance and EB-5 investment programs.
- If Congress and President Trump cannot agree on how to allocate the $1.37 trillion in discretionary money allotted for the new fiscal year beginning October 1, a stopgap funding measure (or “Continuing Resolution”) may be required.
- Last December and January, the lack of a government spending deal over security measures on the southern border led to a 35-day partial government shut down. (Roundtable Weekly, Feb. 1)
The House recessed today for six weeks; the Senate is scheduled to leave August 2.
New forecasts that the federal government may be unable to pay its bills by the first half of September have put pressure on policymakers to raise the nation’s debt ceiling before Congress departs for summer recess – or face the prospect of a national default.
The House of Representatives is scheduled to leave for a six-week recess on July 26 and the Senate one week later; both are set to return on Sept. 9.
- If the debt limit is not increased to meet the nation’s financial obligations, the government could miss payments to federal employees for salaries and pensions, debt service to foreign lenders, and potentially interest payments on the federal debt.
- Today, Treasury Secretary Steven Mnuchin wrote to House Speaker Nancy Pelosi (D-CA), stating: “Based on updated projections, there is a scenario in which we run out of cash in early September, before Congress reconvenes. As such, I request that Congress increase the debt ceiling before Congress leaves for summer recess.” (CNBC, and Politico, July 12) The House of Representatives is scheduled to leave for a six-week recess on July 26 and the Senate one week later; both are set to return on Sept. 9.
- Pelosi and Mnuchin have been in discussions this week regarding the debt ceiling. She said yesterday that Congress should combine a debt ceiling raise with a budget deal that sets federal spending limits for two-years, and that she is “personally convinced that we should act on the (budget) caps and the debt ceiling … prior to recess.” (Politico, July 12)
- Both Pelosi and Senate Majority Leader Mitch McConnell (R-KY) have expressed interest in combining an increase in the debt ceiling with a two-year budget deal. (The Hill, July 12) Congressional leaders are eager to avoid a series of automatic spending cuts known as “sequestration,” which will take place without a new deal on budget caps.
- Aside from reaching agreements regarding the debt ceiling and budget caps, Congress must further come to a deal on federal agency appropriations for FY’20 – to avoid a government shutdown before current FY’19 dollars run out on September 30. Last December and January, the lack of a government spending deal led to a 35-day partial government shut down. (Roundtable Weekly, Feb. 1)
- According to a Treasury report released yesterday, this fiscal year’s tax receipts to date have not offset higher federal spending – even though this month marks a historic 10-year record for U.S. economic expansion. (Wall Street Journal, July 11)
- The Treasury figures show the federal deficit grew to $747 billion over the past nine months, 23% more when compared to the same time period last year. The report also projects the deficit to exceed $1 trillion by Sept. 30, the end of the government’s fiscal year. (Monthly Treasury Statement and Associated Press, July 11)
This week, the Bipartisan Policy Center (BPC) projected the nation’s $22 trillion debt limit could be exceeded in the first half of September, based on new data and analysis. The BPC also reported that federal revenues for Fiscal Year 2019 have been sluggish, with overall revenue growth running at less than three percent. (BPC news release, July 8 and BPC Debt Limit Analysis).