Stories by Nicholas Johnston

Debt is suddenly hot

Illustration of hat with debt
Illustration: Aïda Amer/Axios

The truism that debt and deficits matter is fading away among policy elites.

Driving the news: The chorus is telling us don't worry, be happy: The Wall Street Journal: "Worry About Debt? Not So Fast, Some Economists Say" ... Foreign Affairs: "Who’s Afraid of Budget Deficits?" ... NY Times: "How America Learned to Stop Worrying and Love Deficits and Debt."

Facts Matter

If the U.S. can't pay its bills

Pablo Martinez Monsivais / AP

The Issue:

Congress faces an October deadline to raise the debt limit. In a tweet on Wednesday President Trump blamed Republican Congressional leaders for making it a "mess."

Why it matters:

Failing to raise the debt-limit would be unprecedented. The Bipartisan Policy Center (BPC) said the impact would be "chaotic" as the U.S. Treasury picks payments to make based on available cash, meaning some things, like Social Security benefits, Medicare and Medicaid reimbursements, and even salaries for soldiers might not be paid on time. A 2015 report by Congressional investigators said the impact on financial markets would be "sudden and severe."

The facts:

Treasury Secretary Steven Mnuchin has told Congress the debt limit must be raised by Sept. 29. The debt limit was suspended until March of this year, and since then the Treasury has been using so-called "extraordinary measures" to meet its obligations. Those will be exhausted sometime in October, though the exact date is unknown.

Congressional leaders and President Tump's advisers have said there will be no problem raising the debt limit. But any action will require support from Democrats and some House Republicans have in the past used the debt-limit debate to call for spending cuts.

U.S. to run out of cash in October

Jacquelyn Martin / AP

The CBO forecast has the U.S. Treasury running out of money "in early to mid-October" in its latest update on the deadline for Congress to act on the debt limit.

Why this matters: The CBO gives Congress a bit more time than the Trump administration, which had asked for the debt ceiling to be raised by August. Congress must act to avoid a first-ever default on U.S. debt, and both Democrats and conservative Republicans might try to use the drop-dead deadline as a bargaining chip for pet proposals as they have in the past.

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