The Trump administration doesn't know what to do on the debt ceiling, which could be a serious problem.
The Trump administration is still formulating its policy for the most potentially costly fight coming up on the congressional calendar.
Comments from Mick Mulvaney, the director of the Office Of Management and Budget, on Thursday laid bare the internal divisions the White House over what to do about raising the debt ceiling. And they send a muddled picture of the Trump administration's approach to the upcoming negotiations.
Treasury Secretary Steven Mnuchin has said the Treasury can continue to make payments on its debt obligations until sometime in September, but he has warned Congress to raise the nation's debt limit sooner rather than later.
With a lack of a coherent voice from the White House and a divided Republican majority in Congress, the debt ceiling battle could lead to drastic consequences for the economy.
Two camps have formed in the White House over the debt ceiling issue, based on a review of recent statements from administration officials.
On one side is Mulvaney, who has said in interviews that he wants to see cuts in spending to slow debt accumulation as part of legislation to increase the borrowing limit. Top economic adviser Gary Cohn also said in an interview that the White House is open to adding such provisions.
On the other side is Mnuchin, who told Congress that he favors a quick and "clean" increase with no strings attached.
Trump, for his part, has not taken a public position. He told congressional leaders, including House Speaker Paul Ryan and Senate Majority Leader Mitch McConnell, in a meeting that Mnuchin is "that guy" for the negotiations.
During a congressional hearing Thursday, Mulvaney said the argument is not a "source of division right now in the White House," but he hinted at some disagreement.
"The Treasury secretary is in charge of that discussion and in charge of driving that policy debate and certainly the OMB director participates in that debate," Mulvaney said. "It is not at all unusual for OMB director from any party to say that this might be an opportunity for some fiscal reforms. We haven’t settled on a final way to address the debt ceiling any more than the Hill has."
When asked about the discrepancy between the two sides and which represented the official position of the administration, a White House spokesperson said only that it was important to hike the debt limit "as soon as possible."
"In order to meet the government’s obligations already authorized by Congress, the Trump Administration believes it is important to raise the debt ceiling as soon as possible," the spokesperson told Business Insider. "Over the past two decades, Democrat and Republican majorities in Congress have raised the debt ceiling 15 times. We are confident that Congress will continue to ensure the full faith and credit of the United States."
Amid all the issues on the administration's economic agenda — tax reform, healthcare reform, infrastructure, and keeping the government funded — raising the debt ceiling is the most consequential.
A breach of the debt ceiling would be catastrophic for the short-term economic health of the global economy and the long-term standing of the US. Another credit downgrade — like one that came amid a debt-ceiling fight in 2011 — along with a serious increase in borrowing costs for the US and market chaos are all on the table if the debt ceiling is breached and there are no emergency measures to prevent a default.
When asked again whether the administration had decided to advocate for a clean hike or spending cuts as part of it, the spokesperson pointed Business Insider to Mulvaney's comments.