On March 16, the debt limit ceiling suspension agreed to in the lead up to the 2016 elections officially expired, meaning the U.S. government can no longer take on additional debt until the ceiling is raised. Currently, the federal government is relying on so-called "extraordinary measures" to continue operation, including suspensions of payments to certain pension programs and shifting of funds in government accounts. Earlier this spring, the Trump Administration and outside financial analysts said that the U.S. government had enough cash on hand to last through September or October 2017. However, at the end of May, Treasury Secretary Steven Mnuchin and Director of the Office of Management and Budget Mick Mulvaney separately told Congress that tax receipts are being deposited in government accounts at a slower rate than expected and urged Congress raise the debt limit before the August congressional recess rather than waiting until returning to Washington after Labor Day.

The Trump Administration and congressional Republicans remain divided over how to approach the debate. During the Obama Administration, congressional Republicans attempted to utilize the debt limit deadline to force the Administration to accept passage of a variety of Republican-backed measures in exchange for their support. So far, Republican leadership has not adopted this approach, but the House Freedom Caucus announced its opposition to a "clean" increase in the debt limit, demanding that any increase in the debt limit be paired with spending cuts. The White House, meanwhile, is divided internally as Secretary Mnuchin is urging Congress to pass a clean debt ceiling bill while Director Mulvaney pointedly refrained from using similar language.

House and Senate Democrats are also divided over the issue, with some Democrats calling for a clean debt ceiling increase, and others looking to utilize the debate to extract concessions from the White House – an about face from years past. Among the issues that Senators Chris Murphy (D-CT) and Dick Durbin (D-IL) may seek to tie to their support for a debt ceiling increase, include extending the Children's Health Insurance Program (CHIP) or agreeing on a spending deal that avoids the cuts proposed in the Trump Administration's budget proposal. Republicans will likely need Democrat votes in order to reach the 60-vote threshold to end debate in the Senate and a majority of the House.

Takeaway: The debate over raising the debt ceiling, which Congress had been pushing back in order to address Republican priorities such as repealing the ACA and tax reform, is now front and center as Trump Administration officials warn Congress that it must act before the August recess in order to ensure the U.S. government does not default on its obligations. However, neither Republicans nor Democrats are unified on a path forward with elements of both parties demanding concessions in exchange for their support. Expect the debt ceiling debate to only intensify as we move toward the August congressional recess.