Mnuchin Says Treasury Could Run Out of Cash in Early September

Treasury Secretary Steven Mnuchin said the government could run out of cash in early September, before Congress returns from its August recess, and urged lawmakers to raise the federal borrowing limit before they leave town at the end of the month.

In a letter to House Speaker Nancy Pelosi (D., Calif.) Friday, Mr. Mnuchin said it is impossible to identify precisely when the Treasury will exhaust its “extraordinary measures,” which it has been using to keep paying the government’s bills on time since March 2, when the debt ceiling was reinstated after a prior suspension.

“Based upon projections, there is a scenario in which we run out of cash in early September, before Congress reconvenes,” Mr. Mnuchin said. “As such, I request that Congress increase the debt ceiling before Congress leaves for summer recess.”

Mrs. Pelosi told reporters after speaking with Mr. Mnuchin on Thursday evening that she hoped to reach an agreement to raise the debt ceiling and set new spending levels before the House leaves Washington for the August break on July 26.

“I am personally convinced that we should act on the caps and the debt ceiling,” she said. “Prior to recess.”

The two were expected to speak again on Friday, according to an aide for Mrs. Pelosi.

The Treasury has been warning lawmakers since May that it may exhaust its ability to pay its bills in late summer. A new estimate released Monday by the Bipartisan Policy Center suggested the government could hit the X-datein the first half of September, raising pressure on lawmakers to suspend or raise the federal debt ceiling sooner than they had expected.

If the government can’t borrow more money, the U.S. could be unable to meet all of its obligations, including salaries, benefits and potentially, interest payments on federal debt. Such a default would have unknown financial and economic consequences, and lawmakers have walked right up to the deadline in the past but avoided breaching it.

The earlier debt-limit deadline has thrown a wrench in negotiations over where to set federal spending levels next year. Lawmakers have been assuming that a spending deal for the fiscal year beginning Oct. 1 would include a debt-limit increase.

Mrs. Pelosi has maintained that any debt-ceiling vote should be paired with a new budget deal to lift federal spending caps enacted in 2011. The current budget agreement is also set to expire Oct. 1.

President Trump met Thursday in the Oval Office with chief of staff Mick Mulvaney, acting budget chief Russ Vought and legislative affairs chief Eric Ueland to discuss the negotiations, said a person familiar with the White House efforts.

The White House has asked federal agencies to provide updated shutdown contingency plans by early next month, the person said, describing that request as standard practice.

Exactly when the government will hit the debt limit depends on the pace of revenue collection and spending over the next two months, which can be difficult to project.

Corporate tax revenue had been particularly weak through much of the fiscal year but bounced back in June, a month with significant estimated tax payments, the Treasury said Thursday. Overall, revenue collection increased 3% so far this fiscal year, while outlays have risen 7%, amid higher spending on the military and interest payments on the debt.

Why Trump has spared Pelosi from his personal vitriol — so far

The president genuinely respects the incoming speaker, and needs her if he’s going to get anything done in the next two years. But the government shutdown is about to test his restraint.

When President Donald Trump took to Twitter last weekend to blame Democrats for the government shutdown, he notably bypassed his party’s favorite foil: Nancy Pelosi.

And when Fox News teed up a chance for the president to unload on Pelosi in a New Year’s Eve interview, noting that the Democratic leader was vacationing in Hawaii during the shutdown while Trump stayed in Washington, he didn’t take the bait.

His decision so far not to go after Pelosi personally, even as his top aides have blamed her for the shutdown, hasn’t gone unnoticed in the Capitol. Pelosi’s allies have viewed Trump’s restraint toward the incoming speaker as a sign that he’s looking beyond the shutdown in hopes of notching some bipartisan wins this year — on infrastructure, perhaps, or prescription drug pricing.

Of course, Trump’s tone toward Pelosi could change on a dime given his penchant for pummeling adversaries and the likelihood Pelosi will refuse his demand for billions in border wall funding. But the relative peace between the chief lightning rods of their respective parties, at least to this point, is pretty remarkable.

Trump’s allies told POLITICO his tack represents not some grand negotiating strategy but a sign of genuine regard for her.

“I think the president respects Nancy Pelosi and understands that she represents voters that would never vote for him but also that if she’s serious about getting things done, he’s willing to really negotiate in good faith with her,” said Rep. Mark Meadows (R-N.C.), a Trump confidant on Capitol Hill. The president, he added, views her as a “worthy adversary.”

Added Rep. Debbie Dingell (D-Mich.), “His base is not enough to get him reelected. The American people want to see him get something done. And he needs Nancy Pelosi to get things done.”

Though she, too, has avoided public name-calling, it’s clear Pelosi doesn’t feel the same admiration for Trump. After a recent meeting at the White House, Pelosi returned to the Hill and questioned his manhood before a room full of House Democrats. She likened negotiating with him to getting sprayed by a skunk, and expressed exasperation that he is even president.

Pelosi’s allies say she doesn’t trust him, pointing to

  • a tentative immigration compromise they reached in 2017 that she believes Trump backed out of. She’s noticed how
  • he’s blamed Republican congressional leaders when his base decries spending bills, and
  • upended their legislative plans with surprise tweets.

“Speaker Pelosi has a history of bipartisan accomplishments. … But the test for this president is figuring where he stands on issues from one day to the next,” said Nadeam Elshami, Pelosi’s former chief of staff.

Pelosi is also uncomfortable with Trump’s handling of facts — a big obstacle, in her mind, to cutting deals with him — and has occasionally called him out. During their first meeting after his inauguration, when Trump opened the gathering by bragging that he’d won more votes than Hillary Clinton, Pelosi was the only person in the room to correct him, noting that his statement was false and he’d lost the popular vote.

Since then, Pelosi has tried to correct Trump privately, her allies say. She doesn’t like fighting in public, they added, and it was one of the main reasons she tried, in vain, to end the sparring match over border wall funding that unfolded on TV live from the West Wing last month.

Sources close to Pelosi say she’s willing to work with Trump despite her party’s total rejection of him. Her confidants note that when Pelosi first became speaker in 2007, some Democrats were calling for the impeachment of President George W. Bush over the invasion in Iraq. Pelosi ignored them and went on to strike major deals with Bush, including a bank bailout and stimulus package in response to the 2008 financial meltdown.

“They became friends,” said Rep. Rosa DeLauro (D-Conn.), a Pelosi confidant. For the incoming speaker, “It’s always about: Can you get things done? There are always going to be different points of view. How do we overcome them to get to a conclusion?”

Pelosi allies say as long as Trump is willing to compromise on Democratic priorities, she’ll work with him, too. But with the shutdown dragging into Pelosi’s takeover on Jan. 3, there’s a serious question about whether the two can make any headway.

On New Year’s Day, Trump and Pelosi exchanged words on Twitter over the shutdown — relatively mild ones, especially by Trump’s standards — in a sign of the tense days and weeks ahead.

“I think the president respects her and wants to work with her … Their personalities would lend themselves to strike deals,” Short said. “But I don’t know if Democrats will allow it. … She’s going to have so many members who will object to any transaction or communication with the president, that it puts her in a tight spot.”

It’s just as unclear whether Trump is willing to risk the wrath of his base by compromising with Pelosi. Just as he did on immigration, promising a “bill of love” to protect Dreamers from deportation, Trump privately told Pelosi after their contentious televised negotiation session that he wants to make a deal with her. Even after news that she’d questioned his masculinity went viral, he called her that afternoon to reiterate: We can work together to avert a shutdown.

But that was more than three weeks ago. The two haven’t spoken since.

Days of Fear, Years of Obstruction

What the crisis called for, then, were policies to boost spending, to offset the effects of the housing bust. But the normal response, cutting interest rates, wasn’t available, because rates were already near zero. What we needed, instead, was fiscal stimulus: increased government outlays and tax cuts for lower- and middle-income families, who would be likely to spend them.

And we did indeed get substantial stimulus. But it wasn’t big enough, and even more important, it faded out much too fast. By 2013, with unemployment still above 7 percent, government at all levels was providing barely more economic support than it had in 2007, when the housing boom was still running strong.

.. But the most important reason the great slump went on so long was scorched-earth Republican opposition to anything and everything that might have helped offset the fallout from the housing bust.

When I say “scorched earth,” I’m not being hyperbolic. Let’s not forget that in the summer of 2011 Republicans in Congress threatened to provoke a new financial crisis by refusing to raise the debt limit. Their goal was to blackmail President Barack Obama into cutting spending at a time when unemployment was still 9 percent and U.S. real borrowing costs were close to zero.

.. The very same politicians who piously declared that America couldn’t afford to spend money supporting jobs in the face of a deep, prolonged slump just rammed through a huge, deficit-explodingtax cut for corporations and the wealthy even though the economy is currently near full employment. No, they haven’t abandoned their commitment to fiscal responsibility; they never cared about deficits in the first place.

.. So if you want to understand why the great slump that began in 2008 went on so long, blighting so many American lives, the answer is politics. Specifically, policy failed because cynical, bad-faith Republicans were willing to sacrifice millions of jobs rather than let anything good happen to the economy while a Democrat sat in the White House.

How Mnuchin Keeps a Steady Grip in a Tug of War on Trade

Two weeks ago, Steven Mnuchin, the Treasury secretary, declared that the trade war with China was “on hold” and that the United States would temporarily holster its tariffs. The reassuring comments calmed markets and raised hopes that Mr. Mnuchin, one of President Trump’s most enduring and trusted advisers, was winning the internal trade battle that has gripped the White House.

Then Mr. Trump weighed in. In a one-two punch last week, the president doubled down on the trade war with China and threw in ones with Canada, Mexico and Europe for good measure.

.. The scolding laid bare the uncomfortably familiar spot that Mr. Mnuchin finds himself in: trying to be a voice of moderation and a statesman in an administration that sees diplomatic norms and protocols as signs of weakness.

He has so far managed to stay in Mr. Trump’s good graces while advocating a more free-trade approach, but that balancing act is showing signs of strain.

.. Mr. Mnuchin, unflappable in public, is privately making his case with a president

.. The internal tensions boiled over in May during a trade mission Mr. Mnuchin led to China, when he dressed down Peter Navarro, Mr. Trump’s hawkish trade adviser, by reminding him where he stood in the administration’s pecking order after Mr. Navarro confronted him about being sidelined from the talks.

.. Current and former White House and Treasury officials say Mr. Mnuchin has managed to thrive by employing a mix of assertiveness and obsequiousness, staking out his position to the president but quickly changing course to carry out Mr. Trump’s marching orders, even if his message did not win the day.

.. Mr. Trump tweeted that he was going to find a way to help put back in business a Chinese telecommunications company that had been punished for violating American sanctions on Iran and North Korea. The decision blindsided administration officials and lawmakers

.. Mr. Mnuchin, along with the commerce secretary, Wilbur Ross, was dispatched to Capitol Hill to try to calm angry Republican lawmakers and explain the rationale behind allowing the company, ZTE, to remain in business.

.. those close to the secretary say he has learned to appreciate Mr. Trump’s use of the threat of tariffs as a negotiating tool.

.. focused on the president’s desire to see the bilateral trade deficit reduced, rather than emphasizing some of the other trade barriers

.. Stephen K. Bannon, Mr. Trump’s former top strategist, has said that Mr. Mnuchin is in over his head in the negotiations and that he is letting Mr. Trump’s leverage slip away by failing to force China to make major changes to its industrial policy.

.. it was apparent that the Chinese government was trying to elevate Mr. Mnuchin’s role in the negotiations because they see him as the American official most likely to cut a deal.

.. “Among the possible choices, they see Mnuchin as being less hawkish than some of the other counterparts,”

.. populist voices outside the administration have already been heckling Mr. Mnuchin as inept amid reports that the United States was on the verge of making an agreement with China that was viewed as merely symbolic.

.. Mr. Mnuchin has at times found himself the subject of derision, characterized as a fawning banker who cannot tell the president “no.”

.. Last year, the Treasury secretary was scoffed at by economic policymakers from across the political spectrum for insisting that the $1.5 trillion Trump tax cuts would pay for themselves.

.. Mr. Mnuchin told members of the conservative House Freedom Caucus to “vote for the debt ceiling for me.” His plea was met with groans and hisses.

.. Last August, fellow alumni of Yale, where Mr. Mnuchin earned a bachelor’s degree, called on the secretary to resign when he defended Mr. Trump’s handling of racially inspired violence in Charlottesville, Va. A month later, Lawrence Summers, a Clinton administration Treasury secretary, called Mr. Mnuchin the “greatest sycophant in cabinet history” for supporting Mr. Trump’s criticism of football players who knelt during the national anthem.

.. points to his role in successfully steering the Republican tax cut package, which many said would never pass, through Congress.

.. Within the Treasury Department, Mr. Mnuchin has developed a reputation as a micromanager. He resisted choosing a full-time deputy for more than a year, preferring to oversee everything from carrying out the new tax law to overseeing financial sanctions.

.. When the Internal Revenue Service systems failed on Tax Day, the response to the crash was slowed because Mr. Mnuchin was in New Hampshire

.. He had required that any big decisions be cleared by him

.. Mr. Mnuchin’s closest aides describe him as a collegial and mentoring figure.

.. Despite his earnest persona on television, he is known to possess a wry sense of humor

 

With Budget Deal, the G.O.P. Tosses Out the Economics Textbooks

the Pentagon, which has spent years complaining about spending restraints that were introduced in 2011, will get an eighty-billion-dollar increase in its budget for this year, and an extra eighty-five billion dollars for next year.

.. All told, the deal authorizes about three hundred billion dollars in new spending over the next two years.

.. Gross domestic product .. is currently about twenty trillion dollars

.. the G.O.P. tax bill will reduce tax payments by about a hundred and thirty-five billion dollars in the 2018 fiscal year, and by two hundred and eighty billion dollars in the 2019 fiscal year.

.. If you add it to the additional spending in the budget deal, you’ve got a pretty big “Trump stimulus.”

.. the over-all effect of the tax bill and the spending deal would be about 1.25 per cent of G.D.P. for this calendar year, and two per cent for the next.

.. the Obama stimulus of 2009 through 2011 .. totalled about two per cent of G.D.P. each year

.. Many economics textbooks say this is the sort of environment in which the government should be balancing its books, and perhaps even paying down deb

.. in 2011 prompted members of the Party to refuse to raise the debt ceiling, is purely cynical.

.. The Reagan Administration and the George W. Bush Administration both raided the public purse to finance big tax cuts, and left the deficit much higher than they found it. The Trump Administration is merely following suit.

.. “As long as there is still slack in corners of the labor market, then this kind of fiscal stimulus of the economy near full employment is a kind of test I support.”

Fraudulence of the Fiscal Hawks

In 2011, House Republicans, led by Paul Ryan, issued a report full of dire warnings about the dangers of budget deficits.

.. Citing the horrors of big deficits, Republicans refused to raise the federal debt ceiling

.. How big were these horrifying deficits? In the 2012 fiscal year the federal deficit was $1.09 trillion. Much of this deficit, however, was a direct result of a depressed economy

.. If anything, we should be using this time of relatively full employment to pay down debt, or at least reduce it relative to G.D.P.

.. They are providing more stimulus to an economy with 4 percent unemployment than they were willing to allow an economy with 8 percent unemployment.

.. Republicans weren’t just vehemently opposed to fiscal stimulus; they were also vehemently opposed to monetary stimulus. Basically, they were against anything that might help the economy on President Obama’s watch.

.. imposing austerity in a depressed economy, then running up the deficit when we’re already near full employment

Why Donald Trump’s tweets are only going to get worse

Like others who feel frustrated by their day jobs, the president vents on social media.

Trump is tweeting like a crazy old man for three reasons. First, he has little choice but to spend the next six months or so — at a minimum — on thorny issues that have little upside for him:
  1. North Korea,
  2. a longer-term lift of the debt ceiling, funding the federal government,
  3. dealing with the “dreamers.”

All of these issues will require him to make compromises that are necessary but are of little benefit to him. In these circumstances, Twitter can function as a venue for him to blow off steam.

Second, in dealing with all of these issues, Trump will have to do things that will alienate the parts of his base that believed in him. In the past week, we have seen the likes of Ann Coulter, Laura Ingraham and Mickey Kaus go ballistic about the possibility of a deal on the dreamers. The easiest way for Trump to counteract any criticism he gets from Trump-friendly pundits is to feed his base some form of red meat. Tweets about Hillary Clinton could do the trick.

.. Third, Trump possesses such an oppositional personality that he needs to find ways to rebel against the constraints that John F. Kelly has placed on his White House staff. As his sycophants depart, Twitter is the one place where he can quickly get a similar hit of flattery.

.. Yes, most of his tweets are outrageous, but they are also toothless. Some might argue that simply shrugging off deranged tweets is normalizing the Trump administration. The thing is, we are only nine months into the lamest administration in modern history. Outrage needs to be conserved as a resource for the important stuff.
.. It is a little more surprising to see him squander the one tool he mastered during the presidential campaign. Back in January, his bravado on Twitter seemed genuinely menacing. In the run-up to Inauguration Day, he could tweet at a company and its stock price buckled.
.. What has changed in the past nine months is that Trump has been proven to be a weak and feckless president.
.. At this point, when Trump promises or threatens on Twitter, no one believes him. As he acts more and more hysterical online, he will further erode his ability to use social media to set the agenda.