US House Speaker Kevin McCarthy (R-CA) said on Monday that House Republicans would seek to pass a bill to lift the debt ceiling using budget compromises based on their spending priorities. For months, they have tried to force Democrats into accepting steep budget cuts to social programs to which they object.
“Since the president continues to hide, House Republicans will take action. So here’s our plan: In the coming weeks the House will vote on a bill to lift the debt ceiling into the next year, save taxpayers trillions of dollars, make us less dependent upon China, curb our high inflation - all without touching Social Security and Medicare,” McCarthy said in a speech at the New York Stock Exchange on Monday.
The debt ceiling has been stalled at $31.4 trillion since mid-January, when the newly-inaugurated Republican-controlled House declined to pass a new bill lifting the spending limit. They then approached Democratic leaders with an offer to negotiate on spending cuts as a precondition for passing a new bill with a higher debt ceiling - an offer Democrats have so far rejected out of hand.
“Without exaggeration, American debt is a ticking time bomb that will detonate unless we take serious, responsible action. Yet how has President Biden reacted to this issue? He has done nothing,” McCarthy said on Monday. “Debt limit negotiations are an opportunity to examine our nation’s finances.”
McCarthy offered no line-items details, but said the GOP’s bill would cut federal spending to 2022 levels and impose a 1% cap on annual budget growth over the next decade - essentially, what it has demanded from the White House.
“Let me be clear. A no-strings-attached debt limit increase will not pass,” McCarthy said, referring to the Democrats’ position of raising the debt ceiling without negotiation. Speaking of the GOP’s plan, he said: “It limits, it saves and it grows.”
“A speech isn’t a plan, but it did showcase House Republicans’ priorities,” White House Deputy Press Secretary Andrew Bates said in response, deriding McCarthy’s proposal as a “MAGA wish list that will increase costs for hard-working families,” referring to former US President Donald Trump’s Make America Great Again (MAGA) slogan.
With the debt ceiling exceeded, the federal government is blocked from further funding appropriations, meaning it cannot authorize new spending. While this has the effect of preventing new bills from passing, it also blocks necessary spending, such as servicing of the government’s debts. When the ceiling was reached in January, the Treasury adopted what it called “extraordinary measures,” which basically amount to shifting around existing money in federal accounts, to keep the debt payments going.
However, Treasury Secretary Janet Yellen has warned that such measures can only buy so much time - until perhaps July or August, according to estimates by the Congressional Budget Office - until the money finally runs out and the US defaults on its debts.
A default would trigger a downgrading of the country’s credit rating as well as a likely recession, which could be a death-blow to an already-vulnerable economy, as economists and experts have warned. During a previous budget showdown in 2011, Standard & Poor's downgraded the US credit rating from AAA to AA+, even though lawmakers agreed to an 11th-hour compromise and avoided a default.