House GOP unveils bill to raise debt ceiling to cut spending Here’s how.
But so far that strategy doesn’t seem to have worked. House Speaker Kevin McCarthy (R-Calif.) released a plan Wednesday that his caucus has broad support for, and GOP leaders hope to pass it in the House next week. There is still little sign that Republicans will break through and agree to raise the debt ceiling without conditions, as Biden insists. Efforts by management to enlist corporate executives to create more pressure have not borne much fruit, at least not yet.
Instead, many GOP lawmakers appear willing to allow the country to default without major spending cuts and policy changes — a choice between two outcomes that White House officials see as unacceptable.
“At this point, there is no indication that moderate Republicans will agree to raise the debt ceiling without any reforms from the administration,” said Brian Riedle, a policy analyst at the Manhattan Institute. “I don’t see that happening. They will be crucified within their own caucus.
Inside the White House, the GOP’s tightening stance on the debt ceiling has been met with anger and frustration. Biden aides stubbornly reject the idea of agreeing to anything like the spending cuts and policy changes McCarthy has proposed — both because they oppose the substance of the ideas and because they don’t want to reward the GOP for what they see as its efforts. To hold the American economy hostage. Biden aides are further frustrated by claims that a popular mandate is behind the GOP, as Republicans failed to take back the Senate and held the House in a handful of seats.
A person familiar with White House thinking, who spoke on condition of anonymity to describe internal discussions, said House Republicans are on record as supporting McCarthy’s bill, which would impose new work requirements and reduce the number of Internal Revenue Service agents. and block Biden’s move to reduce student debt — measures the administration believes will be deeply unpopular with the American people.
Biden has welcomed the possibility of negotiating with McCarthy on government spending levels — talks that could resolve the debt ceiling debate while allowing the administration to say it hasn’t negotiated the nation’s spending limit. The person familiar with the White House’s thinking said, “As the president is with everything, they have to start conversations about the budget and spending.” The president told congressional Democrats earlier this week that the administration is open to a separate negotiation with Republicans on the budget, according to a White House statement.
“Let’s be clear about the speaker’s position: If the president and the Senate don’t agree on their entire reckless agenda, they’re going to wreck the economy. It’s not unreasonable — it’s dangerous,” White House spokesman Michael Kikugawa said in a statement. “The president is clear: We must avoid default — That’s non-negotiable — but he’ll hold separate conversations about the budget with Congress leaders.
If Congress doesn’t raise the limit on how much the Treasury Department can borrow, the federal government won’t have enough cash to pay off all of its obligations by early June. Economists believe that such a breach of the debt ceiling — the legal limit on borrowing — would represent an unprecedented breach that would trigger a global financial panic and lead to a recession in the United States.
White House aides have held numerous internal strategy meetings that have explored the dangers of trying to raise the debt ceiling unilaterally without Congress, according to three people familiar with the matter who spoke on condition of anonymity to describe private discussions. Many economists believe any such move would lead to a permanent increase in US borrowing costs, as investors would demand higher interest rates to buy US bonds of legally dubious status.
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Democratic officials have cited the dynamics of past debt ceiling fights as a promising precedent, in which pressure from business executives forced the GOP to raise the limit.
“If we really start to get closer to the drop-dead date and you can’t pay the bills, I believe we’ll see a reaction in the financial markets and people will put pressure on the Republicans who are trying to destroy the economy,” said Dean Baker, a White House fellow at the Center for Economic Policy Research. Economist, leftist think tank. “If we get to that point, you’ll see them back off.”
And yet, with just six weeks to go, there’s little evidence to suggest that will happen. Financial markets have so far steered clear of the debt ceiling drama, with no movement even in the price of US Treasuries. The relative calm in markets has taken pressure off lawmakers to act — which could increase the odds that Congress fails to raise the debt ceiling in time.
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“I don’t think lawmakers will act until they get the call from investors and others in the business community: ‘What are you doing?’ But we haven’t heard those voices yet because they think lawmakers have always done the right thing and acted at the right time,” said Mark Jandy, chief economist at Moody’s Analytics. “It’s a very dangerous drama playing out here.”
Management’s attempts to gain the support of business executives will fail. White House Chief of Staff Jeff Giants has privately asked top business leaders to address the debt ceiling debate, according to two people familiar with the matter who spoke on condition of anonymity to discuss personal opinions. But corporate America doesn’t have as much influence with the GOP as it did in the Obama years, and it’s not clear that such moves will work for House conservatives, who nearly derailed McCarthy’s leadership bid earlier this year.
“What are we going to do, call them and say, ‘Hey, is the credit limit important?’ They know it’s important,” said one business executive, who was asked by administration officials to press the GOP on the issue, speaking on condition of anonymity to reflect private conversations.
White House aides may have less time than they expected. An economic recession could lead to less revenue for the Treasury Department, accelerating the deadline. While acknowledging the data is preliminary, Goldman Sachs analysts suggested earlier this week that “weak” tax collections in April could push the debt ceiling into the first half of June earlier than initially forecast.
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The war of words between the Democratic president and the Republican speaker has become increasingly heated — and sometimes petty.
On Wednesday, McCarthy said Biden was “offering southern border treatment for America’s debt — ignore it and hope it goes away.” For his part, Biden has been accusing McCarthy of being irresponsible to America’s credit, of being beholden to MAGA extremists, and of misleading Americans about his plan. Last month, McCarthy offered to bring “soft food” to a meeting with Biden at the White House, drawing him into an apparent dig at the 80-year-old president’s age over the debt ceiling.
On Wednesday, it took Joe Biden 72 seconds before dinging McCarthy.
“Two days ago, when House Speaker Kevin McCarthy took to Wall Street to outline the MAGA economic vision for America, I was in this union hall with you,” he said, five times he would mention McCarthy by name.
Some Democrats say House Republicans face even more political backlash over the debt ceiling breach than Biden, arguing the president is right to hammer the GOP on its proposed spending cuts. Traditionally, Democratic candidates have had low approval ratings on the economy, but a default by the GOP could give them an opening to change that, said Celinda Lake, a pollster who worked for Biden in 2020.
“We have a huge advantage in selling this variation,” Lake said. “If Republicans are blamed for shutting down the economy, that changes the dynamic.”
But other Biden allies have indicated that economic damage from default could continue into next year, affecting the 2024 presidential election. Presidential approval ratings are closely tied to economic performance, and a long-feared recession could materialize if the U.S. government suddenly can’t pay its bills.
“The two extreme ends of the spectrum of outcomes — the full GOP policy wish list on one side, or catastrophic default on the other — are both completely unacceptable to them,” said one person close to senior White House officials. He spoke on condition of anonymity to openly describe private conversations. “But there’s been no progress in making sure there’s a resolution between those two options.”
Clive R. for this report. Woodson Jr. contributed.