Tag: Debt Ceiling

Debt Ceiling Increase Enacted as House Democrats Consider Cuts to $3.5 Trillion Reconciliation Bill

Posted on by Trey Jackson

Capitol with flag close

President Joe Biden yesterday signed a $480 billion increase in the federal government’s debt limit to $28.9 trillion, narrowly avoiding an Oct. 18 national default deadline. The debt increase – passed by the Senate last week and the House on Tuesday – sets the stage for another fiscal cliff negotiation in less than two months, when both the debt limit and funding for the government run out on Dec. 3. (Associated Press, Oct. 14 and Reuters, Oct. 13) 

Infrastructure Funding 

  • Democrats this week continued to struggle on how to cut the scope and cost of the $3.5 trillion “human” infrastructure bill, after an intraparty split between moderates and progressives postponed a vote on a scaled-down bill in the House. (Wall Street Journal, Oct. 1)
  • House Speaker Nancy Pelosi (D-CA) set an Oct. 31 target date to pass revised legislation under the budget reconciliation process, which requires a simple majority in the 50-50 Senate to bypass Republican opposition. (Bloomberg, Oct. 2) 

Cuts and Scale 

Schumer and Pelosi

  • Pelosi sent an Oct. 11 letter to her caucus members as they work to cut Biden’s reconciliation proposal from $3.5 trillion to approximately $2 trillion. “Overwhelmingly, the guidance I am receiving from Members is to do fewer things well,” Pelosi wrote. (PoliticoPro, Oct 13)
  • On Oct. 12, Pelosi also commented on possible cuts to the length of certain spending programs, stating, “What would be the first to go? … the timing would be reduced in many cases to make the cost lower.” (News conference transcript)
  • In the Senate, Majority Leader Chuck Schumer (D-NY) yesterday sent a letter to his fellow Democrats urging unity as they consider a scaled-back infrastructure bill. “To pass meaningful legislation, we must put aside our differences and find the common ground within our party. As with any bill of such historic proportions, not every member will get everything he or she wants,” Schumer wrote. (Associated Press, Oct. 14) 

Roundtable Concerns 

Marcus and Millichap Oct 21 2021 tax webinar

  • Real Estate Roundtable President and CEO Jeffrey DeBoer will participate in an Oct. 21 Marcus & Millichap webinar on the state of play in infrastructure proposals, the industry’s tax policy concerns and the possible impact on commercial real estate. (Register here)
  • The tax bill passed by the House Ways and Means Committee does not include restrictions on like-kind exchanges, taxation of gains at death, ordinary income treatment for carried interest, and tax parity between capital gains and ordinary income.  The Roundtable argued that these Biden administration tax proposals could harm job growth, local tax revenue, and the economic recovery. 
  • As negotiations continue on a multi-trillion reconciliation proposal, The Roundtable is urging lawmakers to ensure that any final agreement on tax changes to fund a bill would treat pass-through businesses fairly and equitably. The current reconciliation bill in the House would raise the top marginal income tax rate on many pass-through business owners from 29.6% today to 46.4% (a 57% increase). 
  • The Roundtable believes this level of increase on pass-through businesses was unintended by Members of Congress and could undercut the bill’s own objectives of stimulating job growth, improving housing availability, and promoting investment in economically struggling communities, among other priorities.

Additional tax issues affecting CRE are summarized in The Roundtable’s summary on Real Estate Tax Issues and Budget Reconciliation Legislation.  

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Senate Passes Short-Term Debt Limit Increase as Democrats Aim to Reduce Cost of Human Infrastructure Package

Posted on by Trey Jackson

Capitol building bright

The Senate last night passed legislation (S.1301) on a 50-48 vote that would increase the debt limit by $480 billion and avoid an Oct. 18 national default. (Axios and Wall Street Journal, Oct. 7)

New Fiscal Cliff 

  • The bill would also effectively set Dec. 3 as the new fiscal cliff – when the new debt limit and the current short-term government-spending authorization both expire. (Roundtable Weekly, Oct. 1 and CQ, Oct. 7)
  • The agreement struck by Senate Majority Leader Charles Schumer (D-NY) and Minority Leader Mitch McConnell (R-KY) this week raises the current national debt to approximately $28.8 trillion to cover spending previously authorized by the federal government. (NPR and CNBC, Oct. 7) 
  • House Speaker Nancy Pelosi (D-CA) wrote to members of her caucus last night that she would call the House back from recess early to vote if necessary. President Biden said this week said he also would support an increase in the debt ceiling. (Wall Street Journal, Oct. 7 and White House remarks, Oct. 6)

Infrastructure Reset 

DC landscape sunset

  • Meanwhile, disagreements among moderate and progressive Democrats on the scope and cost of a $3.5 trillion “human” infrastructure package delayed a vote last week in the House, prompting Speaker Nancy Pelosi (D-CA) to reset the deadline for lawmakers to reach agreement to Oct. 31. (Forbes, Oct 2) 
  • Congressional leaders and President Biden continued negotiations this week with centrist Senate Democrats Joe Manchin (WV) and Kyrsten Sinema (AZ) aimed at reaching a deal that would allow a human infrastructure bill to pass the Senate with 50 votes. Manchin this week added that he is open to a reduction in the reconciliation bill’s cost to between $1.9 trillion and $2.2 trillion. (CNN, Oct 5)
  • Democrats are now engaged in an intense debate about how to cut the total cost of their human infrastructure bill. Legislation that would raise an estimated $2.1 trillion in taxes from corporations and the wealthy was approved by the House Ways and Means Committee on Sept. 15 to help finance the original $3.5 trillion reconciliation package. (Roundtable Weekly, Sept. 17) 
  • Real Estate Roundtable President Jeffrey DeBoer commented Sept. 17 on the bill’s advancement. “We encourage Congress to review the suggested tax hikes, particularly those on pass-through businesses, and work to ensure that unnecessary and unintended damage is not done to the economy. Substantial commercial real estate activities are conducted by pass-through entities and these activities create jobs, support retirement savings, and boost tax revenue for critical public services provided by local governments.”  DeBoer added, “The Roundtable is encouraged, yet cautious, at this still relatively early stage of the legislative process.” (Roundtable Weekly, Sept. 17 | Sept. 24 | Oct. 1)
  • Roundtable members and others are encouraged to reach out to their Representatives and contact their Senators to urge them to preserve the 20% deduction for pass-through business income (section 199A), which is directly tied to hiring workers and investing in capital equipment and property. Modest adjustments in the legislation would ensure that pass-through businesses could continue contributing to economic growth, innovation, and job creation. Background information and talking points on the pass-through issue can be found here. 
  • Tax issues affecting CRE are summarized in The Roundtable’s summary on Real Estate Tax Issues and Budget Reconciliation Legislation. 
  • DeBoer will participate in an Oct. 21 Marcus & Millichap webinar on the latest tax policy developments in Washington and what they mean for CRE. (Register here) 

Legislation on human and physical infrastructure, the debt ceiling, government funding and many other policy issues affecting CRE were the focus of discussions between Roundtable members and national policymakers during The Roundtable’s Oct. 5 Fall Business Meeting. (See story above).  

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House Democrats Pass Bill to Extend FY22 Government Funding and Suspend Debt Ceiling; Senate Republicans Plan to Oppose

Posted on by Trey Jackson

U.S. Capitol from side with clouds

House Democrats on Sept. 21 passed a short-term funding bill that would keep federal agencies open until Dec. 3 while suspending the debt limit through December 2022. The bill, passed on a party-line vote (220-211) faces bleak chances of Senate approval, where 60 votes are needed to avoid a filibuster in the evenly divided upper chamber. Republicans object to linking the debt ceiling to FY22 government funding. 

Shutdown, Default Loom 

  • The short-term bill to extend funding for government operations at current levels, known as a Continuing Resolution (CR), would avoid a partial government shutdown on Oct. 1. Funding for programs affecting national flood insurance and surface transportation are also scheduled to expire Sept. 30.
  • Senate Minority Leader Mitch McConnell (R-KY) stated Democrats need to separate the CR from legislation that would suspend or increase the debt limit, which the GOP will not support. (Louisville Courier-Journal, Sept. 23)
  • Meanwhile, Treasury Secretary Janet Yellen issued a stark warning to policymakers that they must raise or suspend the debt ceiling as soon as possible – or the federal government will default on its financial obligations sometime in October. (Wall Street Journal, Sept. 19 and Reuters, Sept. 22)
     
  • Yellen stated, “Doing so would likely precipitate a historic financial crisis that would compound the damage of the continuing public health emergency. Default could trigger a spike in interest rates, a steep drop in stock prices and other financial turmoil. Our current economic recovery would reverse into recession, with billions of dollars of growth and millions of jobs lost.” 
  • Treasury has been spending down its reserves since Aug. 1, when the current two-year debt ceiling suspension ended. Yellen warned that hitting the debt ceiling would result in a halt of social security payments to nearly 50 million seniors for a time. Additionally, troops could go unpaid and millions of families who rely on the monthly child tax credit could see delays. (Axios, Sept. 23) 
  • A coalition of 13 real estate trade organizations, including The Roundtable, last week urged congressional leaders to raise the statutory debt limit as soon as possible. The letter stated, “Given the more than $8.6 trillion in mortgage debt backed by the federal government through Fannie Mae, Freddie Mac, Ginnie Mae and other federal agencies, the housing and real estate markets are particularly susceptible to any instability stemming from concern about the U.S. meeting its financial obligations.” (Coalition letter, Sept. 16)  

Policymakers face the debt ceiling and FY22 government funding deadlines next week as Democrats struggle to advance sprawling legislative bills on infrastructure (see Infrastructure story above). 

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Congress Faces Daunting Fall Agenda of Infrastructure Bills, Budget Funding and Debt Limit Deadlines

Posted on by Trey Jackson

red lines to Capitol

Several significant issues affecting commercial real estate converge this month as Congress faces deadlines on a $550 billion “physical” infrastructure bill, a separate $3.5 trillion “social” infrastructure package, government funding for FY2022, and the national debt ceiling.  

The full Senate will return on Sept. 13 and the House on Sept. 20. Deadlines to watch as policymakers face a daunting agenda: 

Sept. 15 — Reconciliation Bills Expected 

  • House committees this week began work on completing various portions of the massive social infrastructure package – including tax revenue raisers impacting CRE – by a Sept. 15 deadline set by House Speaker Nancy Pelosi (D-CA). The $3.5 trillion package will be considered under “reconciliation” budget rules that would only require Democratic votes to pass. (The Hill, Sept. 9 and Roundtable Weekly tax story below)
     
  • Senate Majority Leader Chuck Schumer (D-NY) has instructed his committees to finalize their parts of the upper chamber’s reconciliation bill by Sept. 15 – although this deadline is non-binding and expected to slip. (CNBC, Aug. 11)
     
  • Sen. Joe Manchin (D-WV) wrote in a Sept. 2 Wall Street Journal op-ed that Congress should take a “strategic pause” on the reconciliation package. In a 50-50 Senate, the votes of moderate Democrats such as Manchin and Krysten Sinema (D-AZ) are crucial for passage. 

Sept. 27 — House infrastructure Vote 

House of Reps vote

  • The Senate on Aug. 10 passed a bipartisan bill addressing physical infrastructure with $550 billion in new spending. (Roundtable Weekly, Aug. 13) 
  • Pelosi has set a Sept. 27 deadline for the House to vote on the Senate-passed bill. Pelosi’s move accommodated a group of 10 moderates in her caucus who insisted on de-coupling House votes on physical and human infrastructure legislation. (Roundtable Weekly, Aug. 20)
     
  • Pelosi can afford to lose only three Democratic votes in the narrowly divided House if all Republicans oppose a bill. (New York Times, Sept 5)
     
  • The Real Estate Roundtable held an all-member Infrastructure Town Hall on Aug. 12 to discuss the Senate infrastructure bill, what lay ahead in the House, and the potential impact on commercial real estate. (Roundtable Weekly, Aug. 13)   

October – Federal Government Funding and Debt Ceiling 

Treasury logo on flag background

 

  • Funding for the federal government expires Oct. 1 unless an FY22 appropriations bill is enacted. Congress is expected to pass a stopgap spending bill – known as a Continuing Resolution (CR) – that would fund agencies at current levels to avoid a partial government shutdown. 
  • The CR could also include a measure to suspend or raise the national debt ceiling, which would require at least 10 Senate Republican votes to pass under regular order. 
  • Democratic leaders plan to pursue a bipartisan vote to waive the debt limit. (Reuters and PoliticoPro, Sept. 8) However, 46 Senate Republicans pledged in an August 10 letter that they “will not vote to increase the debt ceiling, whether that increase comes through a stand-alone bill, a continuing resolution, or any other vehicle.” (Bloomberg and The Wall Street Journal, Aug. 10) 
  • Congress must address the national debt ceiling by October, according to a Sept. 8 letter from Treasury Secretary Janet Yellen to congressional leaders. 

The Roundtable will discuss how all these issues impact CRE and the national economy during its Fall Meeting on Oct. 5 in Washington, DC (Roundtable-level members only). 

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House Passes Bipartisan Bill to Suspend Debt Ceiling, Increase Budget Caps 2 Years and End Sequestration; Senate to Vote on Package Next Week

Posted on by Trey Jackson

The U.S. House of Representatives yesterday passed the Bipartisan Budget Act of 2019 (H.R. 3877) that would suspend the national debt ceiling until July 31, 2021; raise federal spending over the next two years; and avoid the threat of automatic, across-the-board “sequestration” budget cuts. The bill now goes to the Senate, which is expected to vote next week.  ( Section-by-Section summary of the bill, Budget Committee)

The U.S. House of Representatives yesterday passed the   Bipartisan Budget Act of 2019  (H.R. 3877) that would suspend the national debt ceiling until July 31, 2021; raise federal spending over the next two years; and avoid the threat of automatic, across-the-board “sequestration” budget cuts.  
  • The measure, which passed 284-149, caps recent negotiations between Democratic congressional leaders and the White House.  Earlier this month, Treasury Secretary Steven Mnuchin wrote to House Speaker Nancy Pelosi (D-CA) warning that if the debt ceiling was not raised, the U.S. could run out of cash to pay its bills in early September, resulting in potential default on the nation’s financial obligations.  (Roundtable Weekly, July 12) 
  • The deal increases discretionary spending limits $324 billion over two years, replacing the prospect of strict sequestration caps imposed under the Budget Control Act of 2011.  The bill passed by the House permanently ends sequestration, which would impose a 10 percent cut on all programs if budget targets are not met.  (CQ, July 25) 
  • The fiscal package passed by the House would increase the budget cap for FY’20 defense programs by three percent, to $738 billion.  Funding for domestic programs would increase four percent, topping off at $632 billion. (Politico, July 25) 
  • The deal also lifts the debt limit through July 2021, meaning policymakers would not have to address the controversial issue during the 2020 election year. 
  • President Trump encouraged GOP lawmakers to endorse the legislation, tweeting yesterday, “House Republicans should support the TWO YEAR BUDGET AGREEMENT which greatly helps our Military and our Vets. I am totally with you!”  
  • Senate Majority Leader Mitch McConnell, (R-KY) this week stated he expects the Senate to pass the House bill next week and send it to President Trump for his signature. (Washington Post, July 25).  He added, “I make no apologies for this two-year caps deal. I think it’s the best we could have done in a time of divided government. The alternatives were much worse.” (Politico, July 23).   
  • When Congress returns from summer recess on September 9, policymakers will face a tight deadline to set federal appropriations for individual agencies and departments for FY’20.  Current FY’19 funding runs out on September 30, as does legislative authority for the National Flood Insurance and EB-5 investment programs.  
  • If Congress and President Trump cannot agree on how to allocate the $1.37 trillion in discretionary money allotted for the new fiscal year beginning October 1, a stopgap funding measure (or “Continuing Resolution”) may be required.  
  • Last December and January, the lack of a government spending deal over security measures on the southern border led to a 35-day partial government shut down. (Roundtable Weekly, Feb. 1) 

The House recessed today for six weeks; the Senate is scheduled to leave August 2.  

Policymakers Under Pressure to Raise Debt Ceiling Before Summer Congressional Recess

Posted on by Trey Jackson

New forecasts that the federal government may be unable to pay its bills by the first half of September have put pressure on policymakers to raise the nation’s debt ceiling before Congress departs for summer recess – or face the prospect of a national default.

The House of Representatives is scheduled to leave for a six-week recess on July 26 and the Senate one week later; both are set to return on Sept. 9.
  • If the debt limit is not increased to meet the nation’s financial obligations, the government could miss payments to federal employees for salaries and pensions, debt service to foreign lenders, and potentially interest payments on the federal debt.  
  • Today, Treasury Secretary Steven Mnuchin wrote to House Speaker Nancy Pelosi (D-CA), stating: “Based on updated projections, there is a scenario in which we run out of cash in early September, before Congress reconvenes. As such, I request that Congress increase the debt ceiling before Congress leaves for summer recess.”  (CNBC, and Politico, July 12)  The House of Representatives is scheduled to leave for a six-week recess on July 26 and the Senate one week later; both are set to return on Sept. 9. 
  • Pelosi and Mnuchin have been in discussions this week regarding the debt ceiling.  She said yesterday that Congress should combine a debt ceiling raise with a budget deal that sets federal spending limits for two-years, and that she is “personally convinced that we should act on the (budget) caps and the debt ceiling … prior to recess.”   (Politico, July 12)  
  • Both Pelosi and Senate Majority Leader Mitch McConnell (R-KY) have expressed interest in combining an increase in the debt ceiling with a two-year budget deal.  (The Hill, July 12)  Congressional leaders are eager to avoid a series of automatic spending cuts known as “sequestration,” which will take place without a new deal on budget caps. 
  • On July 9, McConnell said, “I don’t think there’s any chance we will allow the country to default.  As to the timing, we’re going to stay in close communication with the secretary of the Treasury about when that actually must be done, and we’ll no doubt do it on a bipartisan basis.”  (Bloomberg, July 12)  

  •  According to the Bipartisan Policy Center (BPC) projections, the nation’s $22 trillion debt limit could be exceeded in the first half of September, based on new data and analysis.
    – enlarge graphic – 

      Federal Reserve Chairman Jerome Powell testified yesterday before the Senate Banking Committee that the global economy could suffer “unthinkable” damage if the White House and Congress fail to raise the debt ceiling. (The Hill, July 11)

    • Aside from reaching agreements regarding the debt ceiling and budget caps, Congress must further come to a deal on federal agency appropriations for FY’20 – to avoid a government shutdown before current FY’19 dollars run out on September 30. Last December and January, the lack of a government spending deal led to a 35-day partial government shut down. (Roundtable Weekly, Feb. 1) 
    • According to a Treasury report released yesterday, this fiscal year’s tax receipts to date have not offset higher federal spending – even though this month marks a historic 10-year record for U.S. economic expansion.  (Wall Street Journal, July 11) 
    • The Treasury figures show the federal deficit grew to $747 billion over the past nine months, 23% more when compared to the same time period last year.  The report also projects the deficit to exceed $1 trillion by Sept. 30, the end of the government’s fiscal year.  (Monthly Treasury Statement and Associated Press, July 11) 

    This week, the Bipartisan Policy Center (BPC) projected the nation’s $22 trillion debt limit could be exceeded in the first half of September, based on new data and analysis.  The BPC also reported that federal revenues for Fiscal Year 2019 have been sluggish, with overall revenue growth running at less than three percent. (BPC news release, July 8 and BPC Debt Limit Analysis).