Treasury Secretary Steven Mnuchin on Friday suggested the idea of a U.S. debt limit is misleading.
“We’ve spent the money. So the concept of the debt limit is somewhat of a ridiculous concept. … This is a payment limitation,” Mnuchin said in an interview with Axios cofounder Mike Allen.
The debt limit — currently set at $19.81 trillion — is a cap on how much outstanding public debt the United States may hold.
But since revenue coming into the government doesn’t keep pace with the spending commitments that lawmakers have made over the years, Treasury must borrow to make up the difference to keep paying all the country’s legal obligations in full and on time.
Those obligations are vast, and include payments to federal contractors, interest to bondholders and benefit and refund checks to individuals.
So the debt limit essentially caps Treasury’s ability to keep paying everything the United States owes.
And that’s why lawmakers need to raise it periodically — or at least temporarily suspend it as they’ve done recently.
They’re going to have to increase it or suspend it again this year. If it were up to Mnuchin, they’d make quick work of it.
“I’m hopeful this is something Congress addresses before the [summer] break,” he said.
As it is, debt levels are nearing the limit and Treasury has already begun using special accounting measures to keep outstanding debt just below the limit.
But those measures are only estimated to last until fall, at which point Treasury will face the prospect of defaulting on some of the country’s obligations if Congress hasn’t acted.
That could damage markets and the economy to varying degrees, depending on who gets stiffed and for how long.
Mnuchin, however, says he’s not worried it will come to that, even though the most conservative faction of the Republican Party — including Trump’s budget director — has made raising the debt limit a difficult exercise in recent years.
“Everybody understands we need to raise the debt limit … and that the full faith and credit of the United States is the most important thing,” Mnuchin said.