The hurricane relief and debt deal signed by President Donald Trump last Friday suspends the government's borrowing limit through Dec. 8, but the real deadline will likely be next spring, according to analysts and congressional aides, adding a new wrinkle to upcoming negotiations.
The new 2018 deadline could align with discussions on Capitol Hill over how to handle Mr. Trump's decision last week to end a program shielding young undocumented immigrants who entered the U.S. as children. The president gave Congress six months before the program ends to try to write legislation addressing the so-called Dreamers, creating a deadline of March 5.
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The shift also means that Republicans will have to cast a vote on raising the debt limit in an election year, an outcome GOP leaders had hoped to avoid given the party's longstanding opposition to rising government debt.
The spring debt limit deadline is the product of negotiations between Republicans and Democrats following the deal Mr. Trump struck last Wednesday with Senate Minority Leader Chuck Schumer (D., N.Y.) and House Minority Leader Nancy Pelosi (D., Calif.) to combine aid for victims of Hurricanes Harvey and Irma with a three-month suspension of the debt limit. Mr. Trump also agreed to include a three-month extension of government funding, which will now expire on Dec. 8.
As congressional aides drafted the bill's text over a roughly 12-hour period, they debated how it would be finalized. Democrats pushed to have both the government funding and debt limit reach a hard stop on Dec. 8, while Republicans argued it would be dangerous to prevent Treasury Department officials from being able to use "extraordinary measures," such as redeeming certain investments in federal pensions programs and suspending new investments in those programs, as they normally do when the debt ceiling reaches its official limit, according to aides from both parties.
When the bill was finally introduced late last Wednesday, it retained Treasury officials' authority to use extraordinary measures, enabling them to take steps to continue paying the bills into next spring. Those measures will probably run out sometime in March 2018, the Bipartisan Policy Center estimated on Friday, though the exact timing is uncertain.
Senate Majority Leader Mitch McConnell (R., Ky.) this week touted the final language as a GOP victory, saying his insistence on retaining flexibility for the Treasury means the high-stakes issue won't be part of year-end negotiations.
"The assumption, I think, by my counterparts was that we would continue to have a linkage between the debt ceiling and how we ultimately resolve government spending in December," Mr. McConnell told reporters Tuesday, noting he drafted the final amendment. "I can confidently predict that there will not be a nexus between the debt ceiling and spending decisions in December," he said.
However, the final bill didn't include another provision Republicans had pressed to include, at the request of Treasury officials earlier this year, according to GOP aides. The measure, opposed by Democrats, would have allowed the Treasury Department to keep its cash balance as high as $150 billion when the debt limit suspension expires.
That, along with the use of other cash conservation measures, would have given Treasury enough room to keep paying the government's bills until at least April 15, after which an influx of tax payments could have pushed the deadline into the summer, according to several market analysts.
Because that provision wasn't included, the Treasury Department will instead be able to hold a cash balance of around $70 billion in December -- the same balance it had last Friday, when Mr. Trump signed the bill. Republicans pushed for the change because they believe it is a more efficient cash-management policy, among other reasons, GOP aides said.
The government changed its cash-management policy in 2015 and has targeted a minimum balance of around $150 billion, enough to protect against about five days of potential interruption in market access, which a Treasury advisory committee has called "prudent risk management."
Since then, however, Treasury has fallen short of that figure ahead of recent debt ceiling deadlines, allowing the cash balance to dwindle to around $25 billion.
Mrs. Pelosi on Tuesday shot down Mr. McConnell's characterization of the Democrats as being too self-congratulatory over their deal with Mr. Trump. "We didn't spike the ball," she said. "We could have walked out of the meeting and said they totally folded," she said, but instead, "we said we reached an agreement." She added that Democrats' goal was to do what was necessary to keep the government opened.
Democrats said they now have two leverage points: The first will be in December, when the government's funding expires; the second comes next year, when Congress again has to take action on the debt limit. Both bills will need 60 votes to clear procedural hurdles in the Senate, where Republicans hold 52 seats.
"If they used extraordinary measures to extend the debt ceiling, there would be two cliffs instead of one," Mr. Schumer said Tuesday. "I don't know why they'd want to do that."
Once the debt limit suspension expires on Dec. 8, the Treasury Department will no longer be able to tap bond markets to raise new cash. But it will be able to employ extraordinary measures to conserve cash.
Still, the length of time Treasury has until those measures are exhausted depends on a number of factors, including tax receipts, which are typically low in the beginning of the year as the government begins to pay refunds to taxpayers.
The GOP's plans for tax legislation could also affect the timing. Treasury Secretary Steven Mnuchin said Tuesday the administration and congressional tax writers are open to making any tax bill retroactive to Jan. 1, which would increase tax refunds on the returns that individuals file in early 2018.
Mrs. Pelosi cautioned Republicans about being too optimistic that revenues will keep pace with expenditures. Congress is in the midst of providing billions of dollars in emergency aid to Texas, Florida and other areas following a spate of natural disasters. Those demands will likely strain the budget, which analysts have said could have a knock-on affect to the debt limit's final deadline.
The new spring deadline, meanwhile, means the debt limit negotiations could bleed into discussions over how to handle the fate of young undocumented immigrants currently protected under the Deferred Action for Childhood Arrivals, or DACA. The confluence could give Democrats some leverage to press for a reauthorization of DACA. Many Republicans have said they want to protect the young immigrants from deportation, but at the same time want to take steps to tighten border security.
(END) Dow Jones Newswires
September 12, 2017 19:25 ET (23:25 GMT)