Congress should extend the U.S. government’s borrowing authority before lawmakers depart for their traditional August vacation, the White House said, as the Trump administration sought to ratchet up pressure on Capitol Hill to avoid an unprecedented default on the national debt.
"We’re looking for before they adjourn for August recess," White House legislative affairs director Marc Short told reporters at the White House on Monday.
Members of President Donald Trump’s Cabinet have offered mixed signals on how the administration planned to approach the politically treacherous issue of increasing the debt ceiling, with Treasury Secretary Steven Mnuchin and the budget director, Mick Mulvaney, apparently at odds.
Mnuchin has said he wants a “clean” bill to raise the borrowing limit, without controversial policy riders. Mulvaney and Trump’s top economic adviser Gary Cohn have said the White House would consider spending cuts or other policy changes to cut a deal.
Short, who is the White House’s top liaison to Capitol Hill sidestepped questions Monday on the apparent strategic dispute.
“What I think you will understand from both of them is the need to raise the debt ceiling before Congress adjourns for the summer," Short said.
July 28 is the last day lawmakers in the House and Senate are scheduled to be in session before a five-week break. By declining to provide a clear legislative strategy, the White House invites confusion and inaction in Congress and market volatility as the deadline approaches.
Mulvaney and Mnuchin have also differed on when the government will run out of money. Mnuchin has offered a broad range -- the second half of the year -- while Mulvaney has said it could happen as soon as August. Independent analysts expect the debt limit to be reached in October or November.
Market participants are used to absolute deference to the Treasury secretary regarding the $14 trillion debt market.
The split over strategy gives leverage to Democrats, whose votes are necessary to raise the ceiling or cut spending. Democratic leaders are discussing possible strategies to tie the debt ceiling to blocking tax cuts, a significant shift for a party that has spent the past eight years arguing that debt-limit increases should be free of conditions. Their position could further raise the risk of a default.
Democrats were key to helping resolve the 2011 fight over the debt limit, a protracted standoff that contributed to S&P Global Ratings’ decision to downgrade the U.S. to AA+ from AAA.
The White House also hopes to introduce legislation for its long-awaited tax overhaul shortly after Labor Day, Short said. And while the White House hopes to achieve tax changes that don’t add to the budget deficit, the president’s aides say Trump’s greater priority is winning a tax cut that the administration believes would spark economic growth.
“We believe the elimination of some deductions, the broadening of the tax base, the growth that would be supported by the tax cuts, we want to make it is revenue-neutral," Short said. "I think our greater priority is to provide growth."
The willingness for the president’s proposed tax cuts to run a deficit puts the White House at odds with Senate Majority Leader Mitch McConnell, who said in an interview last month with Bloomberg News that the nation’s “alarming” debt should mean that new tax cuts are balanced with additional sources of revenue.
“It will have to be revenue-neutral,” McConnell said. “We have a $21 trillion debt.”
It also signals that the president is willing to accept a tax cut that would need reauthorization from Congress in ten years, rather than changes to the code that would continue in perpetuity.
Other top legislative priorities for the White House include an overhaul of the Dodd-Frank bill that imposed new banking regulations following the financial crisis. Short said the White House would voice support for the Financial Choice Act, which would repeal and amends corporate governance and executive compensation provisions of Dodd-Frank.
The administration also will push for bipartisan legislation to address human trafficking, a top priority for the president’s daughter and adviser, Ivanka Trump, as well as an infrastructure package the president will unveil on Wednesday during a trip to Cincinnati.
Short said a replacement for Obamacare remains a major priority of the president. While a House-passed bill scaling back the Affordable Care Act has gained little traction in the Senate, he predicted that pressure on the upper chamber would increase as additional insurers exit government-run marketplaces over the summer.
Democrats and some insurers have said the Trump administration is encouraging their exits, or large premium increases, by refusing to guarantee that it will continue to pay subsidies for out-of-pocket healthcare expenses in Obamacare plans and otherwise signaling tepid commitment to the law.
Global financial markets are watching closely how the Trump administration handles the health care and tax reform debates with a Republican-controlled Congress, in which it should have more sway, as a foreshadowing of how smooth the debt-ceiling debate may be.
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