An extension of the nation’s debt limit ran out on Saturday, starting the clock for a potentially painful negotiation between the Democratic House and President TrumpDonald TrumpCheney says a lot of GOP lawmakers have privately encouraged her fight against Trump Republicans criticizing Afghan refugees face risks DeVos says 'principles have been overtaken by personalities' in GOP MORE on raising the nation’s borrowing limit.
The government has until sometime after mid-summer to raise the legal cap on how much the federal government can owe creditors.
The Treasury Department on Friday suspended the sale of certain bonds and began a series of accounting maneuvers, known as “extraordinary measures” that will keep the U.S. government’s nearly $22-trillion debt beneath the legal limit.
Those methods are expected to give lawmakers until August or September to cut a deal before the U.S. misses a debt payment.
The full faith and credit of the U.S. underpins the global economy, and a missed debt payment or default could unleash unprecedented chaos. Battles over the debt limit in 2011 and 2013 led to downgrades of the country’s credit rating and spurred fears of a financial meltdown.
The U.S. “comes shockingly close on a yearly basis to defaulting on its obligations,” said Shai Akabas, director of economic policy at the Bipartisan Policy Center. “But we keep choosing to roll the dice.”
Republicans are also looking to bolster their debt-cutting credentials after two years of spending hikes under Trump. GOP fiscal hawks in the House and Senate have introduced resolutions that would declare the debt a national security threat. Such a measure would likely clear the Republican-controlled Senate but could fail to make it out of the Democratic House.
Treasury Secretary Steven MnuchinSteven MnuchinThe Hill's Morning Report - Presented by Alibaba - Biden jumps into frenzied Dem spending talks Former Treasury secretaries tried to resolve debt limit impasse in talks with McConnell, Yellen: report Menendez, Rubio ask Yellen to probe meatpacker JBS MORE wrote in a Feb. 21 letter to congressional leaders that “honoring the full faith and credit of the United States is a critical commitment,” urging them to raise the debt limit.
And Trump suggested eliminating the debt limit entirely in 2017, though Republicans showed little interest in following through.
The deadline to raise the debt ceiling is also likely to occur close to an Oct. 1 deadline to prevent the imposition of automatic spending caps created by the Budget Control Act.
That dynamic has generated some bipartisan interest in reaching a budget and spending deal that would lift the debt ceiling and fund the government beyond the 2020 election.
A senior House Democratic aide told The Hill that Speaker Nancy PelosiNancy PelosiNorth Dakota Republican latest House breakthrough COVID-19 case Pelosi sets Thursday vote on bipartisan infrastructure bill Cheney says a lot of GOP lawmakers have privately encouraged her fight against Trump MORE (D-Calif.) would prefer to raise the debt ceiling through a broader bipartisan budget deal. A new House rule would automatically send a debt limit extension to the Senate if a budget passes the lower chamber, expediting the process.
Both parties also have their own incentives to reach a deal to avoid mandatory spending caps: Democrats are eager to boost funding on social programs, and Republicans want to avoid cuts to defense spending.
Even so, tying the debt limit to spending talks risks entangling the nation’s credit in difficult negotiations over sticky partisan issues. A showdown over border wall funding led to the longest government shutdown in modern history, leaving more than 800,000 federal workers without pay for 35 days.
“I think there are a lot of people in both parties who want to get past the Budget Control Act, get a debt limit that goes into 2021, and if we could get a two-year deal on spending, that would be a nice package,” said Rep. John YarmuthJohn Allen YarmuthHouse Democrats set 'goal' to vote on infrastructure, social spending package next week House panel set to take up Democrats' .5T bill this weekend The Hill's Morning Report - Presented by Alibaba - Biden jumps into frenzied Dem spending talks MORE (D-Ky.), chairman of the House Budget Committee.
“But it's an irrational world.”
Party leaders have been mum on the debt ceiling so far, but appear eager to avoid any fiscal crises ahead of the 2020 election that could impede congressional reelection bids or the battle for the White House.
While Republicans had previously demanded spending cuts in exchange for raising the debt limit under former President Obama, the Trump administration and GOP leaders have previously supported increasing the ceiling with no strings attached under Trump.
House Minority Leader Kevin McCarthyKevin McCarthyThe Hill's Morning Report - Presented by Alibaba - Democrats argue price before policy amid scramble Fifth House Republican comes out in support of bipartisan infrastructure bill Watch live: McCarthy holds briefing with reporters MORE (R-Calif.) said Thursday that the debt limit “should always be voted on by itself” while Congress mulls how to “change the direction of spending of America.”
Yarmuth said he’s confident that Senate Majority Leader Mitch McConnellAddison (Mitch) Mitchell McConnellHow the Democratic Party's campaign strategy is failing America GOP should grab the chance to upend Pelosi's plan on reconciliation We don't need platinum to solve the debt ceiling crisis MORE (R-Ky.) would back a debt limit increase and called his fellow Kentuckian “a willing partner.”
“I've known Mitch for a long time,” Yarmuth said. “His primary goal would be to get past the election and avoid any shutdowns or any crises where they're going to get blamed for it.”
McConnell’s office declined to comment on the record for this article, but the majority leader has previously said there’s “zero chance” that Congress will let the U.S. breach the debt ceiling.
“America's not going to default. And we'll get the job done in conjunction with the secretary of the Treasury,” McConnell said in August 2017, amid a previous scramble to lift the debt ceiling.
A spokesman for Senate Minority Leader Charles SchumerChuck SchumerAnti-Trump Republicans on the line in 2022 too Democrats urge Biden to go all in with agenda in limbo Democrats press Schumer on removing Confederate statues from Capitol MORE (D-N.Y.) did not respond to requests for comment.