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Hurricane Harvey and the Debt Ceiling Storm

Friday September 1st, 2017   •   Posted by Craig Eyermann at 6:53am PDT   •  

84917998 - extremely detailed and realistic high resolution 3d illustration of a hurricane approaching texas. shot from space. elements of this image are furnished by nasa. Putting together a package of federal aid to assist the Americans who have been displaced from their homes and jobs in the destructive aftermath of Hurricane Harvey—and increasing the statutory debt ceiling of the U.S. government—would appear to be two entirely separate jobs for the U.S. Congress, but political realities will force the two things to be combined.

The truth is that the U.S. government does not have anywhere near the free cash flow needed to fund the recovery efforts to repair the widespread damage in Texas and Louisiana caused by 2017’s Hurricane Harvey. It will have to borrow money to deliver even the basic support that elected officials have promised those whose lives have been disrupted by the natural disaster.

According to Bloomberg‘s Margaret Talev, President Trump will directly connect the two issues at least in the short term as early as Friday, September 1, 2017.

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.

Tying the two things together is being opposed by a number of Republican members of Congress, who object to an unconditional increase of the national debt ceiling without securing any spending reforms in return.

However, the kind of limited increase in the debt ceiling that will likely be proposed by President Trump, as part of the emergency spending package to provide the disaster relief, would not be the blank check for unleashing unlimited and uncontrolled federal spending that fiscally responsible members of Congress might fear. Done right, it will decouple the two political events that are only converging because of the coincidence of the timing of the hurricane and the end of the government’s 2017 fiscal year.

Whether the U.S. Congress can do it right remains to be seen.

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September 2017