Policy

Debt Ceiling Crunch Will Come in Early March, CBO Says

Extraordinary measures will tide the government over for another month, Treasury predicts

Treasury Secretary Steven Mnuchin is pressing Congress to raise the debt limit. In the meantime, he is using so-called extraordinary measures to stave off a funding crisis. (Tom Williams/CQ Roll Call file photo)

Updated 3:45 p.m. | The Congressional Budget Office on Wednesday said the Treasury Department might make it into the first half of March before running out of cash to pay its bills, or a little later than the date announced by Treasury earlier in the day.

In November, CBO had projected that the statutory debt limit would not be reached until late March or early April. But because of legislation signed into law since the last estimate, most notably the tax code overhaul projected to lose at least $1 trillion in 10-year revenue, CBO is bumping up their timeframe by a few weeks.

“After incorporating the anticipated effects of recent tax legislation and actual spending and revenue amounts in December into its calculations, CBO now projects the range of possible dates as falling earlier in March,” the budget office said in its report Wednesday.

Tax withholding for individuals is projected to drop by about $10 billion to $15 billion per month as a result of the tax law starting in February, CBO said. Employers are expected to begin withholding less from worker paychecks based on Internal Revenue Service guidance.

The new estimates are roughly in line with those of some outside experts who have projected the government can continue to pay its bills until early March without a debt limit increase. 

Treasury’s own estimates, updated Wednesday, project borrowing can continue through Feb. 28, or slightly earlier. “Based upon available information, Treasury expects to be able to fund the government through the end of February. Treasury urges Congress to act promptly on this important matter,” Treasury Assistant Secretary for Capital Markets Clay Berry said in a statement.

That timeline puts pressure on Congress to raise or suspend the debt limit in a must-pass bill fairly soon. GOP leaders have been mulling attaching a debt limit increase to a fiscal 2018 omnibus spending bill or a deal to raise the discretionary spending caps for two years. But it’s unclear how close Democrats and Republicans are to agreeing on a budget deal, and lawmakers have a deadline of Feb. 8 to write and pass another fiscal 2018 temporary stopgap spending measure.

In a separate letter to Congress, Treasury Secretary Steven Mnuchin said he would extend a “debt issuance suspension period” that previously ended on Jan. 31 through the end of February. The suspension allows the Treasury to put off investments in the Civil Service Retirement and Disability Fund and other government trust funds to provide continued borrowing room to fund the government, often referred to as “extraordinary measures.” 

“I respectfully urge Congress to protect the full faith and credit of the United States by acting to increase the statutory debt limit as soon as possible,” he wrote.

[Opinion: How Debt Limit Drama Gets Resolved Is Up in the Air]

Mnuchin previewed his department’s intent to extend the use of extraordinary measures through February in an appearance Tuesday before the Senate Banking Committee.

Congress had suspended the debt limit through Dec. 8 as part of a stopgap funding bill that President Donald Trump signed in September. The debt limit reset on Dec. 11 to $20.46 trillion, increasing by the amount of debt incurred since the prior suspension took effect.

Since then, the Treasury has employed bookkeeping maneuvers, including delaying certain investments, to allow continued borrowing to pay government operating expenses and meet obligations to Treasury debt holders.

Watch: The Story of Statuary Hall on State of the Union Night: A Timelapse

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