Earlier this week the Bipartisan Policy Center (BPC) released a new forecast for when the Treasury Department will run out of extraordinary measures and can no longer pay its bills in full and on time without Congress raising the debt ceiling. BPC now forecasts the date as potentially early September, but the more likely outcome is early October. BPC’s original forecast in May was for debt default by October or early November. A decline in corporate tax revenue has pushed up these projected dates. Corporate revenue is running about 9% below the previous fiscal year. While BPC’s forecast carries uncertainty, BPC’s message to Congress is that it can’t ignore the forecast and needs to deal with the debt limit before they adjourn for the August recess. Congress is scheduled to return from the August recess on September 9.
Treasury Secretary Steven Mnuchin today sent a letter to House Speaker Nancy Pelosi (D-CA) in which he wrote that while “it is impossible to identify precisely how long extraordinary measures will last…” he requests “that Congress increase the debt ceiling before Congress leaves for summer recess.” House Speaker Nancy Pelosi (D-CA) has previously said she would not agree to raise the debt limit before an agreement on spending caps is reached. Progressives in her party are pushing her to use these negotiations to increase non-defense spending and demand action on some House-passed Democratic policies. Without a budget caps deal, an automatic $126B in sequestration cuts would kick in at the end of the year. The Administration would prefer to untangle the debt ceiling issue from the budget caps negotiations. This updated timeline could make linking the two issues more difficult.
On the Senate side, Senate Appropriations Committee Chairman Richard Shelby (R-AL) responded to the new BPC forecast saying that this would accelerate the need for serious negotiations. Senate Majority Leader Mitch McConnell (R-KY) said that he would push to get a bipartisan agreement on raising the debt limit and setting the spending limits for FY20 before the August recess. With respect to the FY20 appropriations bills, Shelby said that his committee won’t markup their FY20 spending bills until there is a budget caps deal.
The House is scheduled to adjourn on July 26, not leaving much more time for concluding negotiations and passing whatever deal is eventually reached. The Senate is scheduled to be in session through August 2. The House will likely have to add another week of session to get this done before they leave for the August recess.