Cut or ‘Clean’: Trump, Congress Negotiate on How to Raise the Debt Ceiling

Fred Lucas / May 30, 2017

Since winning a House majority in 2010, congressional Republicans have asked for any increase in the nation’s borrowing limit to be offset, at least in part, by spending cuts.

“Any debt limit increase should be paired with spending cuts to address our debt,” @Jim_Jordan says.

President Barack Obama denied that ambition, but it’s different now that Republicans control the presidency and both houses of Congress.

Or, so it might seem. Last week, Treasury Secretary Steven Mnuchin indicated a “preference” for passage of a clean bill that raises the debt ceiling from $19.81 trillion without necessitating cuts—and before Congress leaves for its August recess.

“I urge you to raise the debt limit before you leave for the summer,” he said.

House Minority Leader Nancy Pelosi, D-Calif., and other Democratic leaders also support such a “clean” increase in the debt ceiling, without attaching it to other matters. But Republicans likely aren’t unified on how to raise the debt limit.

“The responsible thing to do is address the debt ceiling early and avoid a last-minute crisis,” Rep. Jim Jordan, R-Ohio, a member and former chairman of the conservative House Freedom Caucus, told The Daily Signal in an email.

“Any debt limit increase should be paired with spending cuts to address our debt,” Jordan said. “The federal government has a spending problem and it’s time that Congress took meaningful steps toward getting it under control.”

The debt ceiling marks the federal government’s ability to continue borrowing money to pay for its spending. Raising the limit technically isn’t new spending, but it rarely takes the government long to reach the new limit.

The House Freedom Caucus, a group of about three dozen conservatives, issued a statement last week in support of raising the debt limit by August. But the caucus opposed doing so without conditions, and demanded any increase be paired with “cutting [the budget] where necessary, capping where able, and working to balance in the near future.”

Raising the debt ceiling should include budget savings, but shouldn’t mean threatening to default on paying the nation’s bills, said Maya MacGuineas, president of the Committee for a Responsible Federal Budget, a nonpartisan fiscal watchdog group.

“There should not be talk of allowing the country to default. That’s not a credible threat nor a legitimate strategy,” MacGuineas told The Daily Signal. “But, it does make sense to include savings and debt reduction as part of any package to increase the debt ceiling.”

The August recess is earlier than Congress had planned for raising the nation’s borrowing limit, but it is a reasonable amount of time in which Congress can move, MacGuineas said. Such savings should be consistent with a budget policy Congress decides on, which she said she hopes will be reached by that point.

As of last week, the Treasury Department measured the national debt at $19.8 trillion, right at the limit.

The debt limit came back into effect March 15, after it was suspended temporarily by a 2015 agreement between Congress and Obama.

President Donald Trump’s budget proposal estimated that the national debt will increase to $21 trillion by the end of 2018, and to $24.6 trillion by 2027.

Under Obama, the debt increased from $10.6 trillion upon his inauguration in January 2009 to $19.94 trillion when he left office in January 2017.

Policies in the Trump budget proposal, such as imposing work requirements for recipients of Medicaid and food stamps, could be included in a package raising the debt ceiling, said Romina Boccia, a federal budget expert who is deputy director of the Thomas A. Roe Institute for Economic Policy Studies at The Heritage Foundation.

Boccia noted the public doesn’t support simply increasing the borrowing limit without fiscally responsible measures.

“A clean debt ceiling increase is bad optics, bad politics, and bad policy,” Boccia told The Daily Signal. “The debt ceiling can be a key legislative tool for spending cuts in the future and to rein in spending and deficits.”

Mick Mulvaney, director of the White House Office of Management and Budget, opposed raising the debt ceiling without achieving savings when he was a House member from South Carolina. Mulvaney also was part of the House Freedom Caucus.

White House officials last week had a “listening session” with conservative groups and members of Congress about raising the debt ceiling, Boccia said.

Testifying before the House Ways and Means Committee last week, Mnuchin replied, “That is my preference” when asked about raising the debt ceiling without conditions. Referring to the Trump administration, the treasury secretary also told the committee:

We are very concerned that the debt has gone from $10 trillion to $20 trillion over the last eight years. We believe that the most important issue is economic growth. … I urge you to raise the debt limit before you leave for the summer. We can all discuss how we cut spending in the future and how we deal with budgets going forward, but it is absolutely critical that where we spent money, that we keep the credit of the United States as the most critical issue. It is the reserve currency of the world and we need to make sure we raise our debt ceiling to pay our debts.