Treasury Secretary asks Congress to increase Debt Ceiling by Feb 28

This morning U.S. Treasury secretary Steven Mnuchin asked Republican congressional leaders to lift the federal government’s debt ceiling by February 28th, according to a Bloomberg report.

According to the Treasury Department and the Congressional Budget Office, the Treasury will “exhaust all of its borrowing options and run dry of cash to pay its bills by Late Marth or early April” if Congress does not increase its borrowing authority by then.

In September Senate Democrats and the President discussed repealing the debt ceiling and pursue a deal that would permanently remove the requirement that Congress repeatedly raise the debt ceiling, however, this did not pass in the House.

The deal was a ‘gentleman’s agreement’ between President Trump and Senate Minority Leader Chuck Schumer (D-NY) to remove the congressional process for the debt ceiling, something the President and others claim is an outdated process. The latest increase was a 3- month stopgap measure

House Speaker Paul. Ryan (R-Wis.) opposes scrapping the debt limit process, stating that

“I won’t get into a private conversation that we had [at the White House], but I think there’s a legitimate role for the power of the purse of the Article 1 powers, and that’s something we defend here in Congress.”

 

Article 1 of the Constitution sets up Congress’s powers, giving it the authority to write and pass legislation and appropriate government money.

The debt ceiling is a largely arbitrary limit, as Congress is required to increase it in order to avoid a shutdown. The last shutdown occurred in the aftermath of the Obamacare debate in 2013.

2012 was the first year that the debt ceiling as a percentage of GDP was greater than 100%, signaling that the government’s disbursements were larger than their receipts from revenues. 

Congress will now have to approve either another stopgap measure to increase the debt limit, or come to an agreement on upcoming spending increases.

Chart of Debt ceiling increases by President. Source: US Treasury and Congressional Research Service

Chart of Debt ceiling as a percent of GDP. Source: Data from the Guardian, chart by Arvind Venkataraman

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