President Donald Trump is considering attaching an increase in the U.S. debt limit to an initial $5.95 billion disaster aid funding request for Hurricane Harvey, two administration officials said, a move aimed at lowering the risk of an unprecedented default.
The White House request, which could come as soon as Friday, would include $5.5 billion to the Federal Emergency Management Agency and the remainder to the Small Business Administration. The request is being prepared primarily to cover funding demands through the Sept. 30 end of the federal fiscal year, according to the officials, who described the matter on condition of anonymity.
Administration officials already have begun talks with congressional leaders about the approach, which is intended to ease early passage of a debt limit increase and avoid a stand-off over the issue that could rattle financial markets, one of the officials said.
Market angst is growing as Congress has only a limited number of working days remaining to raise the debt ceiling. The spread between one- and three-month Treasury bills has shrunk to around 8 basis points from as high as 24 basis points in May as investors have started demanding higher rates on one-month paper relative to three-month securities in order to compensate for default risk.
The White House would like to extend the debt limit long enough to move back the threat of a U.S. default until after Congress can deal with funding for the full federal fiscal year and tax legislation the Trump administration backs, one of the officials said.
Trump also would like to decouple the debt limit from a potential fight in Congress over funding for a border wall that risks a government shutdown, according to one of the officials. The president would prefer to avoid entangling the borrowing limit deliberations with a battle over paying for the wall that could erupt when lawmakers consider an expected temporary funding package in September or a full-year funding package likely in December.
The White House has responded to Hurricane Harvey with promises to put the full resources of the federal government behind the recovery efforts. Rainfall from the storm has set a record for the continental U.S., according to the National Weather Service, and the response is expected to be among the most expensive natural disaster rebuilding efforts in American history.
Trump began the week pledging to secure funding for relief efforts “very, very
quickly” and visited the region on Tuesday. Vice President Mike Pence made a
stop of his own on Thursday, to reinforce the administration’s commitment, and
Trump plans to head there again on Saturday, with visits to Houston and
More than 311,000 Texans had already applied for federal disaster relief funds as of Thursday morning and more than $530 million already has been granted, Pence said. About 100,000 homes were damaged by the storm, White House Homeland Security Adviser Tom Bossert said in a briefing.
The House may vote on an initial Harvey relief bill in the first two weeks of September, according to a Republican aide who asked not to be named. The initial downpayment, as the aide described it, would replenish FEMA funds used in the immediate aftermath of Hurricane Harvey.
Still, House conservatives are likely to bristle at being pushed to give up on their demands for spending cuts or cost-control measures to be part of any debt-limit deal.
“Why would we do a clean bill with a Republican president?” Representative Dave Brat of Virginia, a member of the conservative House Freedom Caucus, asked in an interview Wednesday. “We need some kind of fiscal reforms here.”
House Freedom Caucus Chairman Mark Meadows told the Washington Post on Thursday he would oppose combining the debt increase with hurricane relief.
Treasury Secretary Steven Mnuchin has repeatedly said that it’s “critical” that Congress raise the debt ceiling by Sept. 29. Independent analysts have estimated the government would reach its statutory limit on borrowing some time in October.
Mnuchin warned Thursday that additional spending on the Hurricane Harvey recovery could shorten the window to avert a U.S. default.
“In terms of when it’s going to hit the debt ceiling, there could be some impact of a couple of days, but that would be the most,” he said in an interview on CNBC.
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