WASHINGTON — Congress will confront a potentially devastating financial crisis in September as lawmakers scramble to avert a government shutdown and prevent the nation from defaulting on its debt for the first time in history.
Treasury Secretary Steven Mnuchin has warned congressional leaders that the government will run out of money to pay its bills by Sept. 29 unless lawmakers vote to raise the debt limit.
Funding to keep the government open is set to expire two days later, on Oct. 1, unless Congress can agree on a spending deal during the approximately three weeks it will be in session in September.
“September is going to be a very difficult month. Obviously all of this is coming into play right away,” House Freedom Caucus Chairman Mark Meadows, R-N.C., told reporters before the House adjourned for its August recess.
The debt limit, set by Congress, is the legal amount the U.S. Treasury can borrow to pay the government’s existing bills, including Social Security and Medicare benefits, military salaries, tax refunds, interest on the national debt, and other obligations.
The government has never defaulted on its debt before, and no one knows for sure what the impact would be. However, economists warn that it could plunge the U.S. back into recession and spark a global economic crisis.
“It is critical that Congress act,” Mnuchin wrote in a July 28 letter to congressional leaders.
Mnuchin began taking “extraordinary measures” to conserve cash in March, when the debt hit the current statutory limit of about $20 trillion. Those measures include deferring investments in federal employee pension funds.
“The debt ceiling isn’t a game of chicken,” said Maya MacGuineas, president of the non-partisan Committee for a Responsible Federal Budget. “It should be raised as soon as possible to ensure continued confidence in our economic system here at home and around the world.”
Congressional action is complicated by threats by the conservative House Freedom Caucus to oppose any increase in the debt limit that is not tied to cuts in spending.
“We demand that any increase of the debt ceiling be paired with policy that addresses Washington’s unsustainable spending by cutting where necessary, capping where able, and working to balance in the near future,” the caucus, which is made up of about 40…