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Republican tax bill and wildfire aid could hasten the need to raise the debt limit

Los Angeles Times

Thursday, January 4, 2018

The next fight over the debt limit could take place earlier than anticipated.

The Republican tax bill could force Congress to act sooner to raise the nation’s $20.5-trillion borrowing ceiling because less money is expected to flow into the Treasury in coming weeks.

On top of that, the possibility of increased federal aid for victims of California wildfires and other disasters, as well as a budget deal that could boost military spending, would drain the Treasury’s coffers faster than expected.

All of those factors mean that lawmakers might have to accelerate their timetable to begin the contentious debt-limit debate. They have been operating under a still-vague deadline — known as the X date — of sometime in March or early April when the Treasury would run out of cash and risk a federal government default.

“I think this is the most uncertainty there’s ever been in projecting an X date given that there are so many policy levers in flux right now,” said Shai Akabas, director of economic policy at the Bipartisan Policy Center, a think tank that has done extensive work on the debt limit.

He estimated Wednesday that the X date would still be in March, but now could be earlier in the month.

The debt limit — a statutory restriction on the federal government’s borrowing — has existed since 1939 and for decades was raised routinely with little controversy. But starting in the 1980s, both parties began using the need to raise the limit as political leverage.

KEYWORDS: DEBT LIMIT, SHAI AKABAS