Top White House officials are imploring key Republicans to move quickly and raise the debt ceiling, four people briefed on the discussions said, concerned that a prolonged impasse could raise the chances of a misstep that damages the economy later this year.
The requests have taken on new urgency because other budget discussions with Capitol Hill have broken down, leaving policymakers at a loss for ways to avoid a pileup of dangerous deadlines in September that could affect the stock market, labor market and economic growth.
Acting chief of staff Mick Mulvaney has played a major role in communicating the desire, and it’s shared broadly by many Republicans on Capitol Hill, according to the people briefed on the discussions, who spoke on the condition of anonymity to describe private deliberations.
But the effort appears to be getting little traction so far, in part because some Democrats are insisting that any debt ceiling deal come as part of a package of changes that raises spending levels after October. The White House has sent mixed signals as to whether it would support raising spending caps, and Democrats have asked for firm commitments before they will proceed.
“I don’t see some up there letting go, just getting the debt limit out of the way completely by itself,” said William Hoagland, a Republican and former staff director on the Senate Budget Committee. He said, though, that both parties would benefit if they resolved the issue as soon as possible.
There has even been some discussion of trying to add a debt ceiling increase to a major disaster-aid bill that has stalled on Capitol Hill. It’s unclear whether that approach could prove viable, but its consideration reflects the administration’s urgency to find some vehicle to get a debt ceiling increase through Congress. In 2011 and 2013, the government nearly breached a debt ceiling deadline because lawmakers and the Obama administration were locked in a tense standoff over other budget issues. At the time, Donald Trump cheered on GOP opposition to raising the debt ceiling, but he has largely backed down from that approach since his inauguration.
The White House’s new pleas come amid a backdrop of increasing acrimony between the White House and Democrats, with some lawmakers openly calling for President Trump’s impeachment. Some White House officials worry that issues such as the debt ceiling could become entangled in other political brawls and get derailed.
The government is projected to spend close to $1 trillion more than it brings in through revenue this year, and it borrows money to cover the difference by issuing debt. The Treasury Department can only issue debt up to a limit set by Congress, however, and lawmakers in the past have tried to force budget changes as part of debt ceiling discussions. The government now has close to $22 trillion in outstanding debt that is subject to the debt limit, according to Treasury data.
Financial experts believe that an economic crisis would occur if the debt ceiling isn’t raised because the government wouldn’t have enough money to pay its bills. The stock market could crash, jobless rates could spike, and interest rates could skyrocket. Such a scenario has never happened before because Congress has always agreed to raise the debt ceiling in time.
Congress suspended the debt ceiling in February 2018, but that move expired in March. The Treasury Department is now delaying certain payments and taking other steps to avoid defaulting on the government’s debt, but it are expected to run out of wiggle room in September or October.
That timeline closely coincides with the Sept. 30 end of the fiscal year, when funding for large portions of the federal government will run out unless Congress and the administration act first. If they do not, there could be another government shutdown like the 35-day partial-funding lapse in December and January over Trump’s demands for money for his Southern border wall.
Trump has threatened to lead another shutdown after the September deadline if his funding priorities aren’t met. They include an additional increase in military spending, more money to construct a wall on the Mexico border, and big budget cuts for things like housing, education, environmental protection and foreign aid. Many Democrats have rejected these priorities, creating a possible impasse because they control the House of Representatives.
If no agreement materializes to lift the spending caps by December, the federal budget for defense and nondefense programs would be reduced by about $125 billion next year. White House officials, including acting budget director Russell Vought, have said they want to adhere to spending caps to control spending, but theyhave privately signaled to lawmakers that they would be willing to lift the caps somewhat to cut a deal.
Still, lawmakers in both parties are pessimistic about reaching agreement on spending bills anytime soon, making it more likely they will run up against the September deadline.
House Democrats are preparing to begin voting on legislation that would increase spending beyond current levels and also includes language on guns and abortion, which is likely to draw immediate Republican opposition.
The House Democratic majority is also contending with division in its own ranks between liberals who want more domestic and less military spending, and fiscal hawks concerned with high spending levels in general. Those divisions forced House leaders to cancel a planned vote this month on a two-year spending plan, and could complicate Democrats’ efforts to pass other spending bills or deals through the House going forward.
Trump’s unpredictability is another factor, making it difficult to plan for any negotiations because he could might make another unexpected push for border wall funding or some other policy that could drive talks to the brink.
Lawmakers also are spooked by the dispute over the $13 billion-plus disaster bill to send much-needed aid to numerous states that have suffered wildfires, flooding, hurricanes and other destructive events . Disaster bills often pass with wide bipartisan support, but this one is hung up in a dispute between Trump and Democrats over how much aid should go to Puerto Rico.
Some lawmakers say their inability to get a deal on the disaster bill bodes poorly for larger conflicts ahead. That has led to predictions that Congress and the administration will do the bare minimum by extending funding at current levels into fiscal 2020, rather than passing new budget bills.
“Optimism’s not here right now. I think realism is. Let’s hope we can work something out,” Senate Appropriations Chairman Richard C. Shelby (R-Ala.) said before Congress left Washington for a two-week recess this month.