Just before the weekend, U.S. Treasury Secretary Steven Mnuchin dropped a bombshell to those paying attention to Friday news: the federal government may run out of cash by early September. “Based on updated projections, there is a scenario in which we run out of cash in early September, before Congress reconvenes,” the secretary wrote in a letter to Speaker of the House, Nancy Pelosi. “As such, I request that Congress increase the debt ceiling before Congress leaves for summer recess.” Since then, Mnuchin and Pelosi have become besties, negotiating directly, and almost continuously, by phone. Both sides want a deal before July 26, yet both sides remain far apart.
The Treasury Department has been using “extraordinary measures” and accounting tricks to fund the government since the debt ceiling was reinstated, at $22 trillion, on March 2. The Bipartisan Policy Center projects there to be enough cash on hand to fully operate the government through October or early November. However, there is “significant risk,” the BPC says, of an unprecedented default on a key payment in early September. Lawmakers are not scheduled to be back in DC until September 9.
Mnuchin, along with Senate Majority Leader, Mitch McConnell (R-KY), and House Minority Leader, Kevin McCarthy (R-CA), urged Congress to pass a clean bill, raising the debt ceiling, by the end of the month. Democrats, however, have attempted to leverage the urgent nature of a fiscal weapon of mass destruction to their own budgetary demands, including increases on discretionary spending caps. If this partisan song and dance, on both sides of Pennsylvania Avenue, sounds familiar, you’re right. Eight years ago, Republicans— who had recently won control of one half of one branch of government— demanded deficit reduction as a condition of raising the debt ceiling. Democrats, who controlled the rest of Washington, insisted on a clean vote.
There also seems to be some disagreement as to just how close each side is to an agreement. Mnuchin said Monday the two sides were “very close” to reaching a deal, and was “very hopeful we can come to an agreement quickly.” Per an aid to Pelosi, their conversation Monday brought “further clarity to their respective positions.” They’ll speak again Tuesday, before Mnuchin departs for a G-7 meeting in France. Both sides, he said, would prefer to pair the suspension of the debt ceiling with a budget deal. Otherwise, the administration had floated the idea of a short-term fix to kick the fiscal can down the road. Pelosi made it quite clear, however, this was unacceptable to her caucus.
The American budgetary process hasn’t always been this way, of course, and it doesn’t have to be. The Budget Impoundment and Control Act of 1974 legally requires the president to spend whatever Congress budgets and he signs. Most countries, at least implicitly, legally authorize borrowing if expenditure exceeds revenue. The Gephardt Rule, passed in 1979, deemed the ceiling raised once a budget was passed, thus resolving the contradiction of voting for appropriations but not voting to fund them. It was repealed in 1995. Yet, since the debt ceiling creates a problem that Congress can blame on the president, who needs the solution that only Congress can provide, this game of fiscal brinksmanship persists. The clock, once again, is ticking.