Lawmakers return to Washington this week with a debt limit deadline looming and no clear plan yet to deal with the issue as the clock ticks down.
The federal government will once again run up against the debt limit when it comes back into effect on Saturday, March 2, at a record high of roughly $22 trillion.
That could set the stage for a clash between Democrats and Republicans along with President Donald Trump. But despite bipartisan outrage over the size of the national debt, there may not be any significant legislative action from Congress right away.
That’s in part because the United States isn’t at risk of an immediate default. The Treasury Department can start taking steps known as “extraordinary measures” to prevent that from happening and those measures could last until at least mid-summer. When they run out, the US would reach a point when it would risk default, referred to as the “X date.”
“Not many people are paying attention at the moment,” said Shai Akabas, the director of economic policy at the Bipartisan Policy Center. “When the reinstatement goes into effect that will be when people generally start paying attention.”
Talks on how to address the debt limit are just starting to get underway on the Hill, one congressional Democratic aide told CNN.
“Conversations on the debt ceiling are at their very beginning phases right now,” the aide said.
Part of the challenge lawmakers face is finding time to confront issues like the debt limit in the midst of an already hectic schedule.
For weeks after the start of the new Congress in January, lawmakers had to devote most of their time and attention to working to reopen the government after a standoff between Democrats and the President over border security triggered a partial shutdown. Then, lawmakers had to work to avert a second shutdown, which they ultimately did earlier this month.
There will also be plenty happening on Capitol Hill this week with issues like congressional reaction to the President’s recent national emergency declaration likely to dominate the agenda, as well as Trump’s personal lawyer Michael Cohen scheduled to testify before several congressional committees starting Tuesday.
Potential scenarios for raising the debt limit and costs of getting close to the deadline
It’s not yet clear how lawmakers will ultimately act on the debt limit and there are a number of different scenarios that could play out.
One potential scenario for raising the debt limit is that lawmakers could try to negotiate a broader agreement involving an increase in the debt limit along with an effort to lift looming budget caps that are set to impact the 2020 appropriations process.
The new House Democratic majority passed a rule so that if the House approves a budget resolution, that automatically triggers the passage of a separate resolution in the House suspending the debt limit and sending it to the Senate.
But the suspension would only go into effect if the Republican-controlled Senate and then the President signed off on it.
Whatever happens, there are real risks involved with just getting close to the “X date.”
“Each time we come up against the debt limit, we impose risks and costs that not many people see or even understand, but are really serious to the economy,” said Akabas of the Bipartisan Policy Center.
Credit rating agency Standard & Poor’s downgraded the credit rating of the United States as a result of a fight over the debt limit in 2011 – in one example of the kind of consequences that can result.
“If we cross the ‘X date’ that could have financial ramifications across the world because the US dollar is so important in the global economy,” Akabas said. “We don’t know what would happen because it’s never happened before … but there’s a cost even from coming close.”
Key House Democrat warns administration against brinkmanship
There are signs, however, that lawmakers are paying attention to the debt limit fight.
In a letter to Treasury Secretary Steven Mnuchin last month, Democratic Rep. Richard Neal, the chair of the House Ways and Means Committee, warned of potential economic fallout if the President decides to “engage in brinkmanship” over the debt limit.
“If the President chooses to engage in brinksmanship on the debt limit, as he did on the shutdown, the market reaction and the cost to our economy would likely be far larger than the 0.02 reduction in GDP that CBO attributed to the shutdown,” he wrote, referring to the Congressional Budget Office.
The letter also requested information from the Treasury Department on how and when the administration plans to request that Congress raise the debt limit and what timeline Congress should be operating under to prevent default.
Aides to Republican Senate Finance Committee Chair Chuck Grassley have also been in touch with the Treasury Department to discuss the debt limit and the timeline associated with the upcoming expiration of the current suspension.
“The Chairman’s staff is in regular contact with the Treasury Department regarding the debt limit and monitors projections of how long so-called ‘extraordinary measures’ can be used by Treasury to keep the government below the debt limit once the suspension ends,” George Hartmann, a spokesman for the Finance Committee chairman, told CNN.
“We also frequently have discussions with individual member offices on member’s thoughts about the debt limit, including thoughts on possible budget-related reforms that could alter the way the debt limit is implemented,” Hartmann added.