03/09/2017

Debt Limit Debate to Emerge This Fall

New CBO report predicts that the issue will arise before the year is out

Congress likely has until sometime this fall to increase the debt ceiling to permit the government to fully pay its obligations, according to a report released this week by the nonpartisan Congressional Budget Office (CBO).

The debt ceiling refers to the maximum amount of debt that the Treasury Department can issue in order to finance the government’s operations. The current debt ceiling suspension expires on March 16, at which point the U.S. government’s debt should total more than $20 trillion.

Since Congress will almost certainly not act to raise the ceiling or extend the suspension by next week, the Treasury Department will be forced to take “extraordinary measures” to ensure essential payments are made without adding to the debt.

“By CBO’s estimate, the Treasury would most likely be able to continue borrowing and have sufficient cash to make its usual payments until sometime in the fall of this year without an increase in the debt limit, though an earlier or later date is possible,” the CBO said in its report.

Congress could potentially deal with the debt ceiling in April when they need to pass a budget for the remainder of fiscal year 2017 or risk a partial government shutdown. But House leaders and the Trump administration will have to convince conservatives and other budget hawks to go along with a debt ceiling increase that they have in the past resisted.

Treasury Secretary Steven Mnuchin sent a letter to Congress this week reminding them that defaulting on any set of obligations could hurt the economy.

“As I said in my confirmation hearing, honoring the full faith and credit of our outstanding debt is a critical commitment,” Mnuchin said. “I encourage Congress to raise the debt limit at the first opportunity so that we can proceed with our joint priorities.”

This article was provided to OSAE by The Power of A.