The worst-case scenario of the budget drama in Washington right now is pretty dire. Congress and the White House have about a week to avoid triggering a stock-market crash, spiking interest rates and a potential credit downgrade of the U.S. economy. All that could come from the government running out of money and not being able to pay things like Social Security checks and military benefits.
Here’s why: The Treasury Department says it will run out of funds to pay its bills by September, and Congress is in town for one more week before it goes on a break for the entire month of August and a little beyond. (The United States is always running at a deficit of cash these days, with a predicted debt that will equal the size of the economy by 2031.)
And one more piece of not-great news: All of this could be setting up a potential government shutdown this fall. House Democratic leaders say they’ll agree to raise the debt ceiling in exchange for a broad outline with the White House on how much money to spend in next year’s budget. They’ll spend the fall filling in the details.
Congress and the White House are going right up to the last minute trying to agree on how much they’ll spend next year. House Speaker Nancy Pelosi (D-Calif.) wants to spend more money on programs like social safety nets. The White House wants her to cut money elsewhere rather than increase overall spending. As of Thursday morning, Democrats refused that idea.
And we haven’t even started talking about the policy fights that could derail a budget deal in the fall. President Trump wants money for his border wall. Some conservative Republicans want to cut out any money for abortion protections in the budget. Liberal Democrats are a wild card on whether they’ll vote for what their leaders come up with, given that they forced Pelosi to pull a vote on a spending bill this spring. And last month, some Democrats tried to stop a border aid bill over concerns it didn’t go far enough to mitigate conditions for migrants at the border.
"[N]othing is agreed to until everything is agreed to,” Pelosi cautiously told reporters Thursday.
Budget experts are worried, too. “I’m worried about everything,” said Maya MacGuineas, the president of bipartisan nonprofit Committee for a Responsible Federal Budget. “There’s so many moving pieces. This is a negotiation that is hard to predict where it will land.”
Okay, now the good news: Nobody negotiating over this wants this to happen — not a government shutdown and definitely not a debt default. The most important and unpredictable person in all this is Trump, who got burned the last time there was a budget drama.
He played a major role in the last government shutdown, which ended in January. Trump acceded to Pelosi's no-border-wall budget after a month of saying he wouldn't.
It wasn’t a good look for him. Polls show Americans blamed Trump over Democrats for the longest government shutdown in U.S. history. His disapproval rating was near its highest in a year.
This time, “Trump will avoid a crisis by simply saying yes,” predicted GOP budget strategist Steve Bell, who used to work on budget committees on Capitol Hill.
Trump sounded optimistic. “I think were in good shape,” he told reporters Friday. “I can’t imagine anybody ever thinking of using the debt ceiling as a negotiating tool.”
On the other side of all this is Pelosi. She has proved she can hold tough positions to get what she wants from the White House. But how badly does she really want a broad budget deal right now that increases domestic spending dollar-for-dollar as much as it increases military spending? Experts doubt she would be willing to let the government default on its loans for it.
“At the end of the day, as much as she wants to tie an increase in the debt limit to the budget caps,” said Molly Reynolds, a congressional budget expert at the Brookings Institution, “there’s no indication to me she’s willing to play chicken with the full faith and credit of the United States.”
So from a fiscal standpoint, the stakes are much higher than January’s budget drama that led to a government shutdown. But precisely because the last shutdown was so nasty, analysts think they’ll be able to reach a deal, even if the path there isn’t immediately clear and the clock is running out.