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Shai Akabas and Steve Bell: Trump’s Treasury secretary faces crucial test on America’s debt limit

The Hill

Thursday, July 27, 2017

Less than six months after taking office, U.S. Treasury Secretary Steven Mnuchin finds himself boxed into a corner, and only Congress can get him out. Mnuchin follows a long line of Treasury secretaries who have duly asked Congress for quick passage of a “clean” debt limit extension. Few have succeeded.

Since the Treasury bumped up against its debt limit on March 16, when the most recent congressional suspension of the debt limit expired, Mnuchin has been doing all that is in his control. He has deployed so-called “extraordinary measures” that he is legally authorized to use as a means to buy more time for Congress to act.

These measures are effectively accounting maneuvers that temporarily reduce holdings of debt in certain government accounts. Treasury can then auction off new debt securities that raise cash to pay the federal government’s bills.

When the extraordinary measures run their course, leaving the Treasury only with cash on hand (similar to your credit cards being stopped, leaving you just with the money in your wallet), the United States will shortly thereafter be unable to pay all of its bills on time and in full — a situation that the Bipartisan Policy Center calls the “x date.”

This means that everyone from Social Security beneficiaries to providers of Medicare and Medicaid services to defense contractors could have their payments delayed.

Mnuchin is currently in a difficult position. But if Congress fails to act on the debt limit before the “x date,” he will be in an impossible position. The Treasury secretary has no legal authority upon which to pay some of the government’s bills and not others.