Trump Administration Warns Tax Receipts Are Coming in Slowly, Government Could Run Out of Cash Sooner Than Expected
By Damian Paletta and Max Ehrenfreund
Washington Post
May 24 at 2:27 PM
While testifying before the House Budget Committee on May 24, White House Office of Management and Budget Director Mick Mulvaney said tax receipts are coming in "slower than expected," and that Treasury Secretary Steve Mnuchin may ask for "a change regarding the date" to raise the debt ceiling. (Reuters)
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.
A few hours later, Treasury Secretary Steven Mnuchin echoed these concerns, telling another House committee that "I urge you raise the debt limit before you leave for the summer."
“We can all discuss how we cut spending and how we deal with the budget going forward, but it is absolutely critical that where we’ve spent money, that we keep the credit of the United States as the most critical issue," he told the House Ways and Means Committee. "It is the reserve currency of the world.”
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. The government is expected to make a payment of between $70 billion and $80 billion to the Military Retirement Trust Fund. As of May 22, the government's cash balance was $164.9 billion, a figure that will be slowly drawn down over time.
Mulvaney and 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, a sentiment he amplified on Wednesday. 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.
Doug Andres, a spokesman for Speaker of the House Paul Ryan (R. - Wis.) said they were committed to address the issue soon.
"The U.S. will meet its obligations, and we will address this issue with our colleagues in the Senate and the administration in a timely manner,” he said.
Similarly, Rep. John Larson (D. - Conn.) said Congress must act on this soon.
"We should have resolution on this before we leave here this summer," he said. "It could be a calamity for the country" if Congress doesn't act.
Donald Marron, who was a member of former President Bush's Council of Economic Advisers, said that many investors might be waiting to sell their assets in the hope that Trump and Republicans in Congress will reduce taxes, allowing them to pay less when they realize their gains. For instance, the Republican effort to repeal the Affordable Care Act, also known as Obamacare, would also eliminate a levy on 3.8 percent on gains from investments.
“You have some investors that are out there saying, ‘Huh. If the health-slash-tax bill goes through, taxes on capital gains go down 3.8 percentage points,” Marron said. “Maybe there’s a chance that tax reform would go even further.”
While detailed data on federal taxes is not yet available, reports from Connecticut – which many wealthy investors call home – supports that theory. The state in serious financial difficulty as officials have said collections are 30 percent below expected levels so far this year. They attribute the shortfall to quarterly income returns, the kinds of payments often made by investors. (Workers who earn wages and salaries, by contrast, pay with each paycheck as their taxes are withheld.)
Max Ehrenfreund writes for Wonkblog and compiles Wonkbook, a daily policy newsletter. You can subscribe here. Before joining The Washington Post, Ehrenfreund wrote for the Washington Monthly and The Sacramento Bee. Follow @MaxEhrenfreund
Washington Post
May 24 at 2:27 PM
While testifying before the House Budget Committee on May 24, White House Office of Management and Budget Director Mick Mulvaney said tax receipts are coming in "slower than expected," and that Treasury Secretary Steve Mnuchin may ask for "a change regarding the date" to raise the debt ceiling. (Reuters)
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.
A few hours later, Treasury Secretary Steven Mnuchin echoed these concerns, telling another House committee that "I urge you raise the debt limit before you leave for the summer."
“We can all discuss how we cut spending and how we deal with the budget going forward, but it is absolutely critical that where we’ve spent money, that we keep the credit of the United States as the most critical issue," he told the House Ways and Means Committee. "It is the reserve currency of the world.”
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. The government is expected to make a payment of between $70 billion and $80 billion to the Military Retirement Trust Fund. As of May 22, the government's cash balance was $164.9 billion, a figure that will be slowly drawn down over time.
Mulvaney and 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, a sentiment he amplified on Wednesday. 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.
Doug Andres, a spokesman for Speaker of the House Paul Ryan (R. - Wis.) said they were committed to address the issue soon.
"The U.S. will meet its obligations, and we will address this issue with our colleagues in the Senate and the administration in a timely manner,” he said.
Similarly, Rep. John Larson (D. - Conn.) said Congress must act on this soon.
"We should have resolution on this before we leave here this summer," he said. "It could be a calamity for the country" if Congress doesn't act.
Donald Marron, who was a member of former President Bush's Council of Economic Advisers, said that many investors might be waiting to sell their assets in the hope that Trump and Republicans in Congress will reduce taxes, allowing them to pay less when they realize their gains. For instance, the Republican effort to repeal the Affordable Care Act, also known as Obamacare, would also eliminate a levy on 3.8 percent on gains from investments.
“You have some investors that are out there saying, ‘Huh. If the health-slash-tax bill goes through, taxes on capital gains go down 3.8 percentage points,” Marron said. “Maybe there’s a chance that tax reform would go even further.”
While detailed data on federal taxes is not yet available, reports from Connecticut – which many wealthy investors call home – supports that theory. The state in serious financial difficulty as officials have said collections are 30 percent below expected levels so far this year. They attribute the shortfall to quarterly income returns, the kinds of payments often made by investors. (Workers who earn wages and salaries, by contrast, pay with each paycheck as their taxes are withheld.)
Max Ehrenfreund writes for Wonkblog and compiles Wonkbook, a daily policy newsletter. You can subscribe here. Before joining The Washington Post, Ehrenfreund wrote for the Washington Monthly and The Sacramento Bee. Follow @MaxEhrenfreund
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