Mnuchin: Debt ceiling won’t hit until early September

Mnuchin: Debt ceiling won’t hit until early September
© Greg Nash

The government will be able to keep paying its debts through at least the beginning of September, Treasury Secretary Steven Mnuchin told a House panel on Monday.

Mnuchin did not give lawmakers a hard deadline for when the debt ceiling needed to be raised but said it could wait until after Congress’s August recess.

“If for whatever reason Congress does not act before August, we do have backup plans that we can fund the government,” he told the House Appropriations Subcommittee on Financial Services and General Government.


“That is not the timeframe that would create a serious problem,” he added.

Mnuchin did not provide any details on “backup plans” for managing the nation’s debt.

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The Treasury secretary reiterated his preference for raising the debt ceiling before the August recess and for doing a “clean” hike that would not pair the debt bill with spending cuts or other budgetary reforms, as many Republicans would like to do.

An early September deadline would pose challenges for Congress if it is a hard deadline.

Lawmakers are not scheduled to return to Washington until after Labor Day, which would give them precious few legislative days to deal with raising the debt limit if the deadline is in early September.

In the past, failure to act as the debt ceiling deadline approached put markets on edge, raising borrowing costs and losing the U.S. its perfect credit rating from S&P. Last week, S&P kept its outlook for the U.S. stable.

“It remains our view that the ensuing debate about raising or suspending the ceiling weighs on the economy,” the ratings agency noted in its report, though it expressed confidence that action would be taken.

Analysts at the Bipartisan Policy Center on Monday estimated that the “X date” for when the government runs out of cash would not hit until October or November. 

“Federal revenues have thus far grown slower than projected for the year by the Congressional Budget Office, but the underperformance has not been large enough for BPC to change its 'X Date' range at this time,” the Bipartisan Policy Center, which closely tracks the debt deadline, wrote in a Monday analysis.

One particularly worrisome day, the analysis said, was Oct. 2, when Treasury is due to make a large payment to the military retirement trust fund.

Technically, the U.S. passed the debt ceiling in March and has been using “extraordinary measures” to pay its bills ever since.

It is those measures that are expected to reach their limits in the coming months, potentially leading the U.S. to default on its debts, though it could buy time by postponing payments for other government services, such as employee paychecks, to begin with.

The debt ceiling issue is part of a jam-packed summer legislative agenda.

Republicans want to finalize a healthcare bill before passing a new budget resolution and kicking off a process of tax reforms, all while working on a plan to avoid a government shutdown in October.