Forget the impact the spectacular health-care debacle will have on the future of tax reform or plans for an infrastructure deal. You need to focus on two freight trains racing toward each other at high speed: the budget and the debt ceiling.
Leave aside the impending fight over the looming expiration of the continuing resolution (CR) on April 28. Even though it could lead to a government shutdown, House Minority Leader Nancy Pelosi (D-Calif.) told a bunch of us columnists in her Capitol office on Tuesday, “This is probably one of their easier bills.”
When Jonathan Swan of Axios questioned the “easier” notion of a new CR, Pelosi, clearly relishing the view from her catbird seat, said, “What comes next with their budget? With their budget from hell? I’m just telling you how bad things are that come next.”
The “budget from hell” Pelosi is referring to is the “skinny budget” released by the White House earlier this month. A document so draconian that it likely will go the way of the American Health Care Act (read, nowhere). And, given the resurgence of the cantankerous caucus of the GOP, House Speaker Paul Ryan will need Pelosi and the votes she can deliver to get a budget passed by Oct. 1, the start of the fiscal year. The price for Democratic votes? Sitting down with Ryan and the GOP caucus to craft the legislation together, Pelosi said. We all know that ain’t ever gonna happen.
But the more Herculean task will be raising the legal limit on federal borrowing. You know it as the debt ceiling. Contrary to conservative myth, raising the debt ceiling is not a blank check for the president. Instead, it allows the government to pay the bills for expenses already incurred by Congress. Under no circumstances can the United States NOT raise the debt ceiling. Failure to do so would destroy the full faith and credit of the United States, the bedrock of the global financial order.
Much to my relief, Treasury Secretary Steven Mnuchin believes the debt ceiling must be raised. He said so in written testimony to Sen. Thomas Carper (D-Del.).
14. The suspension in the debt ceiling enacted in 2015 is set to be reinstated on March 16 of this year. It is crucial that the Federal government be able to meet its legal, financial obligations in full and on time. However, one of your fellow nominees, Mick Mulvaney, who President Trump has nominated to be OMB Director, disagrees, arguing that breaching the debt ceiling is not much of a concern.
Can you tell us, will President Trump call upon Congress to enact a clean increase in the debt ceiling at the appropriate time?
The timely enactment of the debt ceiling limit in early 2017 is an important priority for the Administration. Delay on this matter should not be linked to budgetary and other considerations facing Congress, as the debt limit merely addresses funding the obligations that the United States has already incurred and does not address future budgetary commitments.
Such clarity and clear-headedness by Mnuchin has not been shared by Trump, who said during the presidential campaign that he would agree to a debt limit increase after getting “a very big pound of flesh” in return. Nor has Mnuchin’s good sense been shared by Mick Mulvaney, the new director of the Office of Management and Budget. Remember, the South Carolina Republican was part of the tea party wave elected to the House in 2010 and a founding member of the recalcitrant House Freedom Caucus. Those are the same folks who helped scuttle the repeal of Obamacare because the proposed bill to do so didn’t go far enough.
Sen. Patrick Leahy (D-Vt.) voted against Mulvaney’s confirmation, in part because the former congressman gave frightening answers on the debt ceiling.
I am equally concerned with Mr. Mulvaney’s casual attitude towards the prospect of the U.S. defaulting on its debts. During his tenure in the House, he voted against increasing the debt limit four different times, calling the potential for a U.S. default a “fabricated crisis.” This simply does not comport with reality. Perhaps his views will suddenly change when he transitions from Congress to the Executive branch, but when offered an opportunity to provide reassurance on this point, he again stated that he did not believe that “breaching the debt ceiling will automatically or inevitably” lead to “grave worldwide economic consequences.” This is nothing short of alarming.
Leahy’s alarm comes into sharper focus when you look at the calendar. The House and Senate must devise, debate and pass a new budget before the 2018 fiscal year starts on Oct. 1. Well, Oct. 2, since the previous day falls on a Sunday.
In the middle of all this will come the inevitable hostage situation: The one where Republicans like Mulvaney demand that raising the debt ceiling be accompanied by any number of budget concessions. They tried that in 2011 and earned the United States its first-ever credit downgrade in the process. Pelosi told me Tuesday that a clean bill to increase the nation’s debt limit was the only option. A letter to that effect will be delivered to Ryan soon.
The current legal limit on borrowing expired on March 15. Treasury chief Mnuchin has already informed Congress that he is using “extraordinary measures” to keep the nation from blowing through the current debt ceiling. But that can only last so long. A day certain will come when the government will run out of money to meet all of its financial obligations. The excellent folks at the Bipartisan Policy Center (BPC) earlier this month projected this could happen sometime between October and November.
According to Shai Akabas of the BPC, a big, legally mandated, once-a-year payment into the military retirement trust fund is due at the start of the fiscal year. If the debt ceiling isn’t raised by then, the treasury might not have enough money to cover all of its obligations. And if that happens the United States would be in default for the first time in its history. The BPC calls this the “X date.”
So, the 2018 budget is due by Oct. 2. If the debt ceiling isn’t raised, the government could default on its financial obligations by Oct. 2 thanks to a big bill due that day. But the most important date might be April 18. Tax Day. If the treasury takes in less than expected, those two freight trains could slam into each other sooner than anticipated. And Congress is neither ready to avoid the collision nor prepared for the economic disaster that would follow.
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