Trump roils debt-ceiling debate

The difficult task of raising the debt ceiling just got tougher.

Congressional Republicans, already staring into an ugly September, awoke Thursday to new tweets from President Trump accusing party leaders of bungling the debt-limit talks and, by extension, increasing the odds of a government default. 

Trump said Senate Majority Leader Mitch McConnellAddison (Mitch) Mitchell McConnellSenate passes 0B defense bill Overnight Health Care: New GOP ObamaCare repeal bill gains momentum Overnight Finance: CBO to release limited analysis of ObamaCare repeal bill | DOJ investigates Equifax stock sales | House weighs tougher rules for banks dealing with North Korea MORE (R-Ky.) and House Speaker Paul RyanPaul RyanRyan: Graham-Cassidy 'best, last chance' to repeal ObamaCare Ryan: Americans want to see Trump talking with Dem leaders Overnight Finance: CBO to release limited analysis of ObamaCare repeal bill | DOJ investigates Equifax stock sales | House weighs tougher rules for banks dealing with North Korea MORE (R-Wis.) ignored White House entreaties to lump the debt-ceiling hike with popular bipartisan legislation designed to help war veterans –– a bill Trump signed into law on Wednesday.

ADVERTISEMENT
Yet congressional sources pushed back against Trump’s claims, saying the notion of using the vets-benefits bill as a debt-ceiling vehicle, while bounced around, was rejected out of hand for fear of politicizing veterans and risking the failure of legislation that had strong bipartisan support.

“There was just no traction on it at all,” said an aide on the Veterans Affairs Committee. “We’re not going to politicize veterans’ care.” 

Democrat leaders, meanwhile, said there have been no talks over the August break between the White House and Democrats — whose votes will be needed on any debt ceiling vote. And Ryan, who has insisted the Republicans will raise the debt ceiling before the Treasury defaults, suggested Thursday that GOP leaders are undecided how they’ll move the increase when Congress returns to Washington next month.

“There’s a bunch of different options in front of us,” Ryan told CNBC from a Boeing facility in Everett, Wash., where he’s promoting an overhaul of the tax code. 

“I’m not going to, kind of, negotiate through the media, but we have a lot of options in front of us and I’m really not worried about getting this done.”

Trump’s tweet on Thursday won’t ease the process, heightening the growing tensions between the president and the Republican leaders he needs to realize his ambitious policy agenda.

“I requested that Mitch M & Paul R tie the Debt Ceiling legislation into the popular V.A. Bill (which just passed) for easy approval,” Trump tweeted. “They didn't do it so now we have a big deal with Dems holding them up (as usual) on Debt Ceiling approval. 

“Could have been so easy — now a mess!”

For the Republicans, there’s been nothing easy about raising the debt ceiling in recent years. What was once a routine, if unsavory, piece of budget housekeeping, the issue has morphed into an acrimonious ideological debate with the rise of Tea Party-backed conservatives who have opposed any such increase without drastic cuts to federal spending.

The vote has been a perennial headache for Republican leaders, squeezed between those deficit hawks and the Democrats, who reject the spending cuts –– and whose support is essential to pass any debt-limit hike through Congress.

Applying pressure, House Minority Leader Nancy Pelosi (D-Calif.) put the ball squarely in the GOP’s court Thursday, emphasizing that Republicans control all the levers of power in Washington. 

“With the White House, House and Senate under one party control, the American people expect and deserve a plan from Republicans to avert a catastrophic default and ensure the full faith and credit of the United States,” she said. 

“With so much at risk for hard-working families, Republicans need to stop the chaos and sort themselves out in a hurry.”

The Treasury Department reached the debt limit months ago, but officials are able to shuffle funds –– a budgetary dance known as “extraordinary measures” –– to extend their ability to make good on obligations.  

Treasury Secretary Steven MnuchinSteven Terner MnuchinOvernight Finance: CBO to release limited analysis of ObamaCare repeal bill | DOJ investigates Equifax stock sales | House weighs tougher rules for banks dealing with North Korea Week ahead in finance: Clock ticking for GOP on tax reform More former classmates of Mnuchin call on him to resign MORE said last month that the agency can stave off default until Sept. 29, creating a clear deadline for Congress to act. He’s pressing for a “clean” hike, free of extraneous provisions that could threaten passage of the bill. 

“I'm all for spending controls,” Mnuchin said Monday, appearing beside McConnell at an event in Louisville, Ky. “But as it relates to the debt limit, this is not about spending money, it's about paying for what we've spent, and we cannot put our credit on the line.”

McConnell’s office did not respond Thursday to a request for comment. But like Ryan, the Senate leader has dismissed the notion that Republicans could miss the deadline for lifting the Treasury’s borrowing limit.

“There is zero chance — no chance — we won't raise the debt ceiling,” McConnell said in Louisville.

Raising the stakes, several finance agencies have warned this week that even the threat of a government default could have dire consequences for the economy. 

Fitch Ratings, a global credit agency, said if Congress fails to act “in a timely manner,” the group “would review the U.S. sovereign rating, with potentially negative implications.” And a Wall Street Journal analysis on Thursday revealed that some market investors are already betting on default.

There’s a precedent for such moves. During another debt-ceiling fight in 2011, Standard & Poor’s revoked the country’s top credit rating.