Fresh off one fiscal showdown, Congress could soon face another, with the U.S. debt ceiling set to take effect again on March 2.
The debt ceiling is a statutory cap on federal borrowing. Raising it does not authorize new spending but allows the government to borrow more to pay for spending that Congress already approved. The limit was suspended through March 1 as part of a February 2018 congressional budget deal.
With the suspension now due to expire, the Congressional Budget Office said in a new report Tuesday that lawmakers will likely face a late summer or early fall deadline to raise the debt limit or risk defaulting on payments. Until then, the Treasury Department should be able to use “extraordinary measures,” or accounting maneuvers, to avoid default.
“With a large inflow of tax revenues in April, those extraordinary measures would enable the Treasury to continue financing the government’s activities for several months,” CBO estimated in its report. “However, if the debt limit remains unchanged, the ability to borrow using those measures will ultimately be exhausted, and the Treasury will probably run out of cash near the end of this fiscal year or early in the next one.”
Congressional discussions on how to address the debt limit are “at their very beginning phases right now," one Democratic aide told CNN this week. Lawmakers could decide to once again raise the borrowing limit as part of a broader deal addressing budget caps for fiscal 2020. “It is probably more apt to be part of the budget negotiations that go on around here, and it probably won’t be settled until the summer because of the ability of the government to transfer funds from retirement, for instance, to stop us from borrowing money,” Sen. Chuck Grassley (R-IA) said Monday.
In semiannual testimony before the Senate Finance Committee on Tuesday, Federal Reserve Chair Jerome Powell said “it would be a very big deal” for the U.S. to not pay its bills. “It’s beyond even consideration. The idea that the U.S. would not honor all of its obligations and pay them when due is something that can’t even be considered,” he said.