WASHINGTON — Treasury Secretary Steven Mnuchin said Monday that lawmakers could be forced to raise the debt ceiling without a broader budget deal if an agreement isn’t reached very soon, warning that time was running out to ensure that the government had enough money to pay all its bills.
White House officials have begun discussing such a scenario with some congressional aides, several people briefed on the talks said Monday. They are eyeing a plan that would temporarily raise the debt ceiling, by perhaps just a few weeks, to give them more time to negotiate a budget package. The fallback plan would be aimed at ensuring there is not a financial crisis if negotiators misjudged the government’s balance sheet and Treasury did not have enough money to make payments while lawmakers were out of town.
Democrats and Republicans have not told the White House that they will approve such an approach, but it has emerged as a fallback option as they run out of time to broker a broader budget deal before lawmakers are set to depart at the end of next week.
The chaotic planning comes after Mnuchin has spent more than a week trying to negotiate a broader budget and debt limit deal with Congress.
‘‘I’m very hopeful we can come to an agreement quickly,’’ Mnuchin told reporters at the White House. But, ‘‘if for whatever reason,’’ a budget deal isn’t reached, ‘‘before they leave, I’d either expect them to stick around or raise the debt ceiling.’’
Mnuchin met with President Trump about the budget talks on Monday morning, and he spoke with House minority leader Kevin McCarthy and Senate majority leader Mitch McConnell about the negotiations over the weekend. Democrats want the White House to agree to increase spending levels for defense and nondefense programs over the next two years. White House officials have agreed to increase spending levels, but not as high as the levels demanded by Democrats.
As these talks drag on, some White House officials have pushed for the consideration of a separate measure that would simply raise the debt ceiling to ensure that they have more time to negotiate without worrying about whether Treasury can pay all of its bills.
But lawmakers from both parties have told the White House that they aren’t sure if they have the votes to raise the debt ceiling unless it is part of a broader budget agreement. Mnuchin’s decision to float the option publicly on Monday could signal that he believes time is running out, though some Democrats believe that the White House has been trying to pressure them to raise the debt ceiling without offering concessions in the budget talks.
Mnuchin has warned that the Treasury Department could run out of money to pay all of its bills in early September if a debt ceiling deal isn’t crafted before the August recess, a position that some outside experts have also said is accurate.
If the debt ceiling isn’t raised in time, the Treasury Department might not have enough money to pay all of its bills. This could lead to a spike in interest rates and stock market crash, among other things, because it could call into question the full faith and credit of the United States.
The US government spends much more money than it takes in through revenue. To pay all of its bills, the Treasury Department issues debt as a way to borrow money. But it can only issue debt up to a limit set by Congress. Last year, Congress suspended this debt limit until March 2019. After this suspension expired, the Treasury Department began taking steps to delay a default by doing things like suspending certain investments. But it will run out of flexibility soon, Mnuchin has warned.
The US government had $19 trillion in debt when Trump took office, and now total government debt has surpassed $22 trillion.
Many Republicans decried raising the debt limit during the Obama administration, saying the government should do more to cut back on borrowing. But they have mostly gone along with Trump’s efforts to widen the debt through tax cuts and large spending increases. Still, lawmakers do not like to hold votes that simply raise the debt ceiling and prefer to do it as part of a package, which is why many have pushed for including the debt ceiling increase as part of a broader budget deal.
Lawmakers must craft a new budget deal by the end of September, because that’s when funding for many agencies is set to expire. If lawmakers don’t fund the agencies after Sept. 30, there will be another government shutdown. Mnuchin said on Monday that the White House does not want to see another shutdown, but he said they didn’t have enough time to wait until late September to deal with the debt ceiling and budget talks, as the debt ceiling deadline could be much sooner.