Treasury Secretary Steven Mnuchin put his request on paper for Congress to act on the debt ceiling before the August recess, writing to congressional leaders Friday that there’s a chance Treasury could run out of cash in early September.
“Since there is a reasonable uncertainty in projecting government cash flows, it is impossible to identify precisely how long extraordinary measures will last,” Mnuchin wrote in his four-sentence letter, referencing accounting maneuvers Treasury can engage in to carve out room under the $22 trillion debt limit.
“We model various scenarios for our cash projections. Based on updated projections, there is a scenario in which we run out of cash in early September, before Congress reconvenes,” the letter continues. “As such, I request that Congress increase the debt ceiling before Congress leaves for summer recess.”
The House is scheduled to leave for recess on July 26; the Senate a week later. House Speaker Nancy Pelosi, D-Calif., said Friday she hadn’t seen Mnuchin’s letter yet, but she might have another call with him today.
Pelosi spoke with Mnuchin twice on Thursday, and she said she’s “personally convinced” that Congress should act on the debt limit before the recess — only if accompanied by a deal to raise the austere discretionary spending caps for next year’s appropriations bills and possibly the following year’s.
The White House and House Democrats remain far apart on spending caps, with administration officials pushing the idea of a one-year stopgap at current funding levels as a compromise. House Democratic leaders prefer the higher nondefense funding levels they’ve already been passing on the House floor, and their bills would also boost defense funding above what a continuing resolution would provide.
White House negotiators are open to raising the spending caps if there can also be substantial offsets and budget process changes included in the deal, a person with knowledge of the caps talks said.
But the White House is skeptical Democrats will agree to that, and therefore the administration is seriously considering maintaining a hard line against a cap increase, the person said. The source pointed out GOP leaders have been arguing for offsets to higher caps in the talks, which House Minority Leader Kevin McCarthy, R-Calif., has publicly advocated for.
Treasury’s updated forecast is in line with comments in late May that the debt ceiling would need to be raised possibly by “late summer.”
Independent forecasters this week said that while Treasury could potentially make it through September based on their evaluation of incoming tax receipts and spending outflows, there was a major risk of running short before Sept. 16, when quarterly tax receipts are due.