White House Office of Management and Budget Director Mick Mulvaney on Wednesday said that tax receipts were coming in “slower than expected” and that the federal government could run out of cash sooner than it had thought to pay its bills.
Mulvaney’s comments, which came during a House Budget Committee hearing, resurrected an issue that Congress has mostly ignored in recent months but will soon trigger tough political decisions.
The government runs a budget deficit because it spends more money than it brings in through revenue, and it borrows money to cover that difference by issuing debt. There is a legal limit, though, on how much debt the government can issue, and this limit must be raised by Congress.
In 2015, the Obama administration and Congress agreed to suspend the debt ceiling, but the extension expired in mid-March. Now the Treasury Department is taking emergency steps to suspend certain payments so that it can cover all of its bills, but it can only do this for a few more months.
The Bipartisan Policy Center, which analyzes federal receipts and spending, had estimated that the government had until November to address the debt ceiling issue, but it recently moved up its projection to Oct. 2 because tax receipts are coming in slower than expected and a huge federal payment is due that day.
Mulvaney and Treasury Secretary Steven Mnuchin met to discuss the debt ceiling on Tuesday, and are planning to meet with White House National Economic Council Director Gary Cohn when he returns from President Trump’s current foreign trip.
Mulvaney said that the White House did not have a “stated policy yet” on what Congress should do about the debt ceiling. Mnuchin has in the past urged Congress to raise or suspend the debt limit. Trump, before he became a presidential candidate, ridiculed lawmakers for raising the debt ceiling, and Mulvaney – when he was a member of Congress – has opposed efforts to increase the debt ceiling, saying then that Congress should do more to restrain government spending.
If tax receipts are coming in slower than expected, this could raise pressure on lawmakers to raise or suspend the debt ceiling by the August recess. These votes can be very politically unpopular, but many business groups have warned that failing to raise the debt ceiling could lead to a financial crisis, because the U.S. government might not have enough money to pay its bills.