Mnuchin Boosts Urgency for Congress to Raise U.S. Debt Limit

(Bloomberg) -- Treasury Secretary Steven Mnuchin urged members of Congress Wednesday to increase the U.S. debt ceiling before taking their August recess, as the Trump administration warned that tax receipts were coming in slower than expected.

"I think it’s absolutely important that this is passed before the August recess and the sooner the better,” Mnuchin told members of the House Ways and Means Committee in Washington.

Earlier Wednesday, White House Budget Director Mick Mulvaney told the House Budget Committee that Mnuchin alerted him about the tax receipts, an indication that a date for increasing the limit might be moved up from a prior estimate that it would have to be raised in October or November.

Mulvaney said Mnuchin may soon announce when so-called extraordinary measures for keeping spending below the debt limit are expected to run out.

Mulvaney said he met Tuesday with Mnuchin to discuss the debt ceiling and that further meetings are planned on strategy and timing of an increase after Gary Cohn, director of the U.S. National Economic Council, returns from abroad.

Second-ranking Senate Republican John Cornyn of Texas said his chamber should be able to pass a debt ceiling increase by August. He said Wednesday’s comments from the administration were the first he had heard the timeline may move up.

"I think we need to adjust our schedule accordingly," Cornyn said.

Representative John Yarmuth, the top Democrat on the House Budget Committee, said, “We want to get this done as soon as possible. We are ready to talk."

Mnuchin told the Ways and Means panel he wants a "clean" debt ceiling increase not attached to entitlement cuts or other fiscal policy changes. 

“We can all discuss how we cut spending in the future and how we deal with the budgets going forward," Mnuchin said, "but it is absolutely critical that where we spent money, that we keep the credit of the United States as the most critical issue.”

President Donald Trump’s administration is "very concerned" that the national debt has risen from $10 trillion to almost $20 trillion over the past eight years, the Treasury secretary said.

The $19.809 trillion national debt limit came back into effect on March 15 after being suspended by Congress in 2015. Trump’s budget request estimates that the debt subject to the limit would rise to $21.067 trillion by the end of 2018 and to $24.658 trillion by 2027.

‘Noisy, Messy and Complex’

Wall Street’s main credit-rating companies have said they’re confident an agreement will be reached in time.

"Our fundamental assumption is that even though the politics around raising the debt limit can be noisy, messy and complex, the U.S. has a track record of always managing to get it done," Sarah Carlson, a senior analyst at Moody’s Investors Service, said this week. "We would not have the U.S. with a Aaa rating if we didn’t.”

Democrats on the Ways and Means Committee applauded Mnuchin for calling for a clean increase, warning that any repeat of Republicans’ attempt in 2011 to use the debt ceiling to force a budget-cutting agreement would damage the economy.

"The gaming and politics that could take place could be a calamity for the country," said Representative John Larson of Connecticut.

Mulvaney, during his Senate confirmation hearing, floated the idea of using the debt limit to force Congress to accept spending cuts.

Problems for Ryan

Advancing the date for action on the debt limit could present problems for House Speaker Paul Ryan and other Republican congressional leaders.

Republicans control the House, but a number of of their members -- particularly about three dozen members of the conservative House Freedom Caucus -- have opposed raising the limit, meaning that GOP leaders have had to rely on votes from Democrats to help pass such a measure. 

The Freedom Caucus said in a statement Wednesday it will demand, as it has previously, that any debt limit increase be paired with measures to cut or cap spending to help balance the budget in the near future. The group said Congress should address the matter before August.

In the 2015 vote, 167 Republicans opposed the debt-limit suspension measure, which passed  266-167 with Democrats providing 187 "yes" votes.

Republican Representative Jim Jordan of Ohio, a founding member of the Freedom Caucus, said in an emailed statement, “Secretary Mnuchin is right. We’ve known that we are approaching our debt limit for a long time, and the responsible thing to do is address it early and avoid a last-minute crisis."

"But any debt limit increase should be paired with meaningful spending cuts to address our debt," Jordan said.

Democrats have argued that raising the debt ceiling to allow the nation to pay its bills is a must-pass to avoid financial chaos, and that it should be carried out in a measure unattached to policy riders.

Still, second-ranking Senate Democrat Dick Durbin said in an interview, "We don’t want to see default. If they need our votes, then we need to talk about some priorities." Asked whether that might include Obamacare subsidies that Trump has threatened to halt, Durbin said, "We don’t want to see the health-care system of America in danger."