Treasury Secretary Steven Mnuchin for the first time Monday said the Treasury Department only has enough money to fund the government through early September, a much earlier timeline than many analysts had projected.
Mnuchin’s comments, made at a congressional hearing, came in response to a question about the debt ceiling, which is preventing Treasury from borrowing enough money to cover the large gap between how much money the government brings in through revenue and how much it spends.
He asked Congress to lift the debt ceiling before it leaves for the August recess.
“We’ve run lots of models and there are lots of different assumptions,” he said. “I am comfortable saying we can fund the government through the beginning of September.”
Earlier on Monday, the Bipartisan Policy Center said its models showed Treasury should have enough money to fund government operations through October or November, though it said there was a lot of uncertainty about the exact timeframe.
Mnuchin said, though, that there was a “backup” plan if the debt ceiling isn’t raised before Congress’ August recess, though he wouldn’t provide more information about what this would entail.
Treasury’s cash balance was $148 billion on June 8, down from $273 billion in late April. The cash balance fluctuates as revenue comes in and goes out each month.
If the debt ceiling isn’t raised, the Treasury Department could be forced to prioritize which payments to make. White House Office of Management and Budget Director Mick Mulvaney has suggested they could prioritize the interest payments on federal debt as a way to technically avoid “defaulting,” but this could still spook financial markets, lead to a stock market crash and a surge in interest rates.
Increasing the debt ceiling does not authorize any additional government spending. Rather, the ceiling only determines how much the Treasury Department can legally borrow, and if the department is unable to borrow enough to pay bills the government has incurred through spending, the government could be forced to default on some of its obligations.
House Speaker Paul Ryan, R-Wis., has said Congress will raise the debt ceiling, though Republicans have not unified behind a central plan for how to do it. Raising the debt ceiling can be a politically perilous vote, and President Trump — before he took office — ridiculed Republicans for voting to raise the debt ceiling in the past.
One reason Treasury is facing a cash crunch is because it is collecting less money in tax revenue than projected. Mnuchin said on Friday that one reason for this is that some Americans are delaying tax payments because they want to take advantage of lower tax rates that could be put in place by the White House and Republicans in Congress.
Federal revenues so far this fiscal year have been about 3 percent below projections, according to a monthly report published last week by the nonpartisan Congressional Budget Office (CBO). That amounts to a shortfall of $60 billion to $70 billion, the report said.
The amount of cash the federal government has on hand can change drastically from one month to the next. The government spent about $3.9 trillion last year and took in about $3.3 trillion, according to CBO, but the revenues do not always arrive at the same time that the government’s bills are due, resulting in large shifts in the government’s balance.
In February, for instance, federal spending exceeded revenues by $192 billion, according to the Treasury Department’s monthly statement. In March, the deficit was $176 billion. In April, however, the government operated a surplus of $182 billion as federal taxes came due.
The debt ceiling can only be raised by Congress, and it sets a cap on how much money the government can borrow. The government currently spends more money than it brings in through tax revenue, and it borrows money to cover this different by issuing debt.
(c) 2017, The Washington Post · Damian Paletta, Max Ehrenfreund