Treasury Secretary Jack Lew and President Obama/ White House photo by Chuck Kennedy
A better-than-expected cash flow at the U.S. Treasury has turned May 18 into just any old day.
That was supposed to be the deadline for lawmakers to come to an agreement on raising the debt ceiling, which is the limit Congress places on its own borrowing. But the mortgage giants Fannie Mae and Freddie Mac are expected to send tens of billions of dollars in profits to the Treasury over the coming months, while government spending has gone down due to the cuts of sequestration. That means the federal government will borrow less money and won't hit the debt ceiling until after Labor Day, according to Treasury Secretary Jack Lew.
Historically, raising the debt ceiling was a routine order of business - it's happened dozens of times since the debt ceiling was first put in place in 1917. But in recent years it's become highly politicized. Republicans in Congress have used the debt ceiling as an opportunity to negotiate with Democrats and the president for spending cuts and deficit reduction. In 2011, the threat of hitting the debt ceiling and defaulting on interest payments led lawmakers to agree on the Budget Control Act, which cut trillions of dollars from federal spending and put in place the across-the-board cuts of sequestration, which went into effect on March 1 of this year.
Unlike past debt ceiling negotiations, which Republicans have used to demand deficit reduction, GOP officials are now focused on implementing corporate tax reform. Their proposal – which would lower tax rates while closing loopholes – essentially means that deficit reduction will not be on the table this time around. That's because the Republicans are opposed to raising new revenue via the tax code.
In recent months the president has said he won't negotiate over the debt ceiling - a promise he kept in January, when lawmakers decided to suspend the debt ceiling through May 18.