WASHINGTON – After four years of trillion-dollar deficits, the red ink is receding rapidly in Washington, easing pressure on policymakers and shattering hopes for a summertime budget deal.
Federal tax revenues are up and spending is down because of an improving economy, tax increases enacted in January and the hated budget cuts known as the sequester. As a result, the U.S. Treasury has slowed the pace of borrowing from the frantic days of the 2008 economic crisis and was actually able to repay a tiny fraction of the $16.8 trillion national debt in the first quarter of this year.
The slower borrowing rate means the Obama administration will be able to pay the nation’s bills for months without new borrowing authority from Congress — likely until Oct. 1, according to new independent forecasts. That might seem like good news, but it is unraveling Republican plans to use the debt limit deadline to force a budget deal before Congress takes its August break.
Instead, the fiscal fight now appears likely to bleed into the fall, when policymakers will face another multi-pronged crisis that pairs the risk of default with the prospect of a full-scale government shutdown.
In the meantime, Republicans face a listless summer, with no leverage to shape a new debt-reduction agreement.
After successfully goading the Democrat-controlled Senate into adopting its own budget plan, the House is ducking efforts by Senate leaders to formally open negotiations. On Tuesday, House Budget Committee Chairman Paul Ryan, R-Wis., explained their reluctance, saying the pressure of the debt limit is essential to forcing Democrats to agree to the kind of far-reaching changes to Medicare and the U.S. tax code that Republicans see as the fundamental building blocks of a deal.
“The debt limit is the backstop,” Ryan said before taking the stage at a Washington summit on the debt organized by the Peter G. Peterson Foundation. “I’d like to go through regular order and get something done sooner rather than later. But we need to get a down payment on the debt; we need entitlement reform; we’re very serious about tax reform because we think that’s critical to economic growth and job creation. Those are the things we want to talk about.”
Democrats are urging Republicans to come to the table well before the next deadline. “The American people — all of us — are tired of management by crisis,” Senate Budget Committee Chairman Patty Murray, D-Wash., said at the Peterson summit. “We need to start working now in conference committee.”
But senior Republicans in the Senate, including several who have recently dined with Obama and met with senior administration officials, acknowledged that it would be tough to bring their colleagues to the table too far ahead of the deadline.
The debt limit is being pushed back in large part because the deficit is falling faster than most anticipated, meaning a substantial reduction in government borrowing.
The Congressional Budget Office estimates that the deficit this year will be $845 billion, though it will soon revise its projections, likely lower. Goldman Sachs recently estimated that the deficit this year will be $775 billion, nearly 30 percent lower than the year before.