The Treasury Department warns that it would soon run out of cash if Congress doesn’t step in. The Treasury the debt ceiling in March, and it is now running on its last reserves of money. U.S. Treasury Secretary Steve Mnuchin urges Congress to raise the debt limit before congressmen leave for recess.
GOP Would Rather Postpone the Issue
The debt ceiling is a limit over which the Treasury can no longer borrow cash to cover for government spending. The limit can be changed only by Congress. Congressmen have hoped to postpone the issue until after their late July recess.
However, critical reports show that the Treasury risks to run dry if lawmakers don’t take action next month. The Trump administration underlined that tax revenue was not as good as anticipated.
We need to make sure we raise our debt ceiling to pay our debts,
Mnuchin told congressmen last week.
Mick Mulvaney confirmed that the receipts are coming slower than anticipated, so, the Treasury needs a change in the date. The GOP agrees that the limit needs to be raised but they want to vote for it after the recess.
Sen. Orrin Hatch told reporters that it needs to be done sooner to prevent the government from defaulting. Republicans don’t want to vote because they are now battling to get the GOP healthcare overhaul past the Senate.
Spending Cuts vs a Clean Raising
What’s more, the GOP leadership must first reconcile the different opinions within the party before going for a vote. the Freedom Caucus, which is the most conservative wing of the House, wants spending cuts before raising the debt limit, while moderates and Democrats want a raise with no cuts.
The caucus wrote in joint statement that it refuses a “clean raising” of the limit, as the current spending is “unsustainable”. Conservatives want the matter to be addressed by congressmen before the recess. The Freedom Caucus thinks the best solution lies with “cutting where necessary, capping where able, and working to balance”.
This opposition could force GOP leaders to look for help in the Democratic Part to pass the bill. Republicans will need 60 votes to prevent a filibuster on the Senate floor where the GOP has only 52 seats.
Democrats historically haven’t opposed a larger debt limit, at least under president Barack Obama. But now, they may make use of the opportunity to squeeze policy concessions from the GOP. Some Democrats however would like a clean increase because otherwise they might risk losing their voters’ trust.
In 2011, there was a similar situation over the debt limit. The GOP almost pushed the government into default after they insisted for big cuts to government expenditures. The two parties negotiated the limit increase for more than half a year when they finally reached an agreement in August.
The prolonged talks led to the U.S. government’s first credit downgrade. In addition, the Dow Jones index slipped 2,000 over the summer, with stock markets becoming increasingly restless over the uncertainty.
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