Budget battle, debt ceiling hang over Congress

Congress returned to Washington this week with yet another set of budget deadlines looming. Government authorizations expire Sept. 30, and a failure to reach a budget deal could lead to a government shutdown Oct. 1.

Several weeks later, the U.S. is expected to hit its $16.7 trillion borrowing limit, which will require the government to raise the debt ceiling or face default.

Treasury Secretary Jacob Lew said in a letter to Speaker John Boehner released last Monday that the government is running out of accounting maneuvers it has used to avoid hitting the borrowing limit. He pressed Congress to act so the Treasury can keep paying the government's bills.

Lew said it's impossible to predict exactly when the borrowing limit will be reached. But he warns that if action isn't taken soon, the government could be left with $50 billion in cash by mid-October. He says that wouldn't be enough to cover Social Security payments, military salaries, Medicare and other programs for an "extended period."

The deadlines set up major budget fights that translate to uncertainty in the country's monetary policy, according to The Washington Post:

For now, the White House has abandoned its hopes for a large budget deal that would address both increases in tax revenue and reductions in long-term spending on programs such as Social Security and Medicare. Instead, it is proposing an overhaul in corporate taxes to close what it considers loopholes and reduce rates. This would be in exchange for additional spending on public works projects to create jobs.

Republicans are demanding long-term spending cuts, with some insisting that any deal must jettison money to pay for Obama's health care law. The White House argues that the attention on cutting spending is misplaced because the combination of existing cuts, higher taxes on the rich and an improving economy has reduced the deficit.

Without the opportunity to cut a grand bargain on taxes and entitlement spending, however, there are fewer incentives to make a big deal on the debt ceiling and fewer opportunities to attract lawmakers who are reluctant to raise the politically unpopular debt in the first place.

As Congress prepares to return, we preview the debate we'll likely see in Washington and what it means for federally funded programs.

The Associated Press contributed to this report.

LEARN MORE ABOUT UPCOMING CONGRESSIONAL BATTLES:

• Boehner proposes 'short-term' bill to avert government shutdown
House Speaker John A. Boehner said that he plans to avert a government shutdown at the end of September by passing a "short-term" budget bill that maintains sharp automatic spending cuts, known as the sequester. (Washington Post)

• U.S. Federal Budget Chronology
News about the U.S. federal budget, including commentary and archival articles published in The New York Times. (New York Times)

• Treasury takes new tack in fight with House GOP on debt ceiling
It is always difficult to nail down a specific deadline on the borrowing limit given the huge amounts of payments going in and out of the federal government on a given day, something Lew and [former Treasury Secretary Tim] Geithner have both underlined. (The Hill)

• Next fiscal fight: Why Wall Street should worry
Here is just a sampling of why Wall Street may be wrong: The House GOP is hopelessly fractured on spending strategy. Senate Republicans who might otherwise broker a deal face primary challenges that make compromise potentially deadly. Other Senate Republicans are jockeying for 2016. And congressional Democrats have no appetite for any bargain — grand or otherwise — that cuts entitlement spending." (Politico)

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