WASHINGTON (AP) — The drop-dead deadline for Congress to increase the government’s borrowing authority and avoid a devastating economic default is early to mid-October, says a government estimate released Thursday that delivered another challenge to Republican leaders.
Thursday’s Congressional Budget Office report also predicts that the federal government’s budget deficit will spike to $693 billion this year, $134 billion more than it predicted in January. The worsening deficit picture is mostly due to slipping projections of tax revenues.
Congress must act by the October debt deadline or else risk an economy-rattling, first-ever default on U.S. obligations.
The CBO report gives Congress slightly more time than Treasury Secretary Steven Mnuchin has estimated. He has asked lawmakers to increase the so-called debt ceiling before leaving Washington for their August recess — but has also said the government can avert default through September.
The national debt is almost $20 trillion. A 2015 debt limit law expired in March, and Mnuchin has been using accounting maneuvers to keep the government solvent.
The upcoming votes in both the House and the Senate promise to be a challenge to GOP leaders such as Speaker Paul Ryan, R-Wis. Many Republicans refuse to vote to increase the borrowing cap, which means Republicans controlling Washington are sure to have to rely on Democrats to pass an increase.
The breathing room offered by the CBO report and Mnuchin’s recent statements probably mean that Congress won’t act on the politically toxic debt limit issue until September. It would add to a crush of business that month, which includes stopgap legislation to avert a government shutdown when the budget year ends Sept. 30.
On the deficit, CBO says “one reason for the sharp rise in the deficit in 2017 is the slow growth in revenue collections.”
All told, CBO predicts that cumulative deficits will rise by $686 billion over the coming decade.
CBO estimates reflect current law, so they don’t reflect any assumptions about the course Republicans may take on repealing and replacing the so-called Obamacare law. But the projected $686 billion increase would dwarf the improvements to the government’s deficit picture that would result from either the House or Senate health care legislation, which blends benefit cuts and tax cuts to reduce deficits by up to $321 billion over the coming decade.
Yeah, I’m sure not worried. Top men, top men are on it.
Slipping tax revenues??! Only one way to solve that. More tax cuts!
What is the cause of the slipping tax revenues?
One element would be the GOP promises that tax cuts are coming. Asset owners have some control over when to take taxable gains on investments.
I still remember a conservative newspaper editorial crowing about how Reagan was right about tax cuts increasing tax revenues, because the year that a big cut in capital-gains tax took effect there was a huge increase in reported capital gains over the prior year. The real story was that, for much of the prior year, investors were taking all the losses they could and hanging on to their gains until the lower rates applied.
Corporations might also be slowing repatriation of profits taken overseas for a similar reason – the GOP has talked about [yet another] tax holiday to allow corporations to bring back profits they have been taking overseas to evade higher taxes in the US.