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.
- On July 9, McConnell said, "I don't think there's any chance we will allow the country to default. As to the timing, we're going to stay in close communication with the secretary of the Treasury about when that actually must be done, and we'll no doubt do it on a bipartisan basis." (Bloomberg, July 12)
Federal Reserve Chairman Jerome Powell testified yesterday before the Senate Banking Committee that the global economy could suffer "unthinkable" damage if the White House and Congress fail to raise the debt ceiling. (The Hill, July 11)
According to the Bipartisan Policy Center (BPC) projections, the nation's $22 trillion debt limit could be exceeded in the first half of September, based on new data and analysis.
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- 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).