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Tag: debt limit

  • A History Of The U.S. Debt Ceiling

    A History Of The U.S. Debt Ceiling

    Congress is debating an 11th-hour compromise plan on the nation’s debt ceiling that would stave off a U.S. default. The Onion looks back at the history and crises of one of America’s most sacred institutions.

    Trump Takes Out Full-Page Newspaper Ad Calling For Death Penalty For Himself

    1789: U.S. goes into debt for first time when George Washington borrows five shillings from a British friend.

    1917: Congress establishes debt ceiling to ensure government doesn’t indulge in frivolous helping.

    1946: Secret shadow government debt ceiling tripled to help fund Cold War.

    1995: Everyone involved in debt ceiling negotiations agrees it so pointless and awful that country has no choice but to go through it again and again and again.

    1999: Debt ceiling raised an extra $23.99 to cover donuts for Harry Reid’s birthday.

    2003: Congress raises debt ceiling to afford one slightly used Iraq.

    2011: Republicans demand President Obama give up his own healthcare in exchange for raising debt ceiling.

    2014: National debt hits all-time high under weight of Obama’s Candy Crush microtransactions.

    2023: Despite calls to ignore the made-up ceiling, Democrats still capitulate to Republicans.

    2025: America defaults on its debt and is purchased by China.

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  • The Case for Debt-Ceiling Optimism

    The Case for Debt-Ceiling Optimism

    As the government careens toward the brink of default without a deal to lift the debt limit, an unlikely source of reassurance has emerged.

    “I think everyone needs to relax,” Mitch McConnell told reporters on Tuesday in his home state of Kentucky. “The country will not default.” The longtime Republican leader, who once boasted of being the Senate’s “grim reaper,” isn’t known for his soothing bedside manner. His equanimity was hard to reconcile with the vibes emanating from the Capitol on that particular day, where House Republican negotiators were accusing their Democratic counterparts in the White House of intransigence and insisting that the sides remained far apart.

    The Treasury Department has said that if Congress does not raise the nation’s borrowing limit, the government could, as early as June 1, default on its debt for the first time. The economic repercussions could be catastrophic—first a market crash, then, economists believe, a recession. Because the House and Senate would need at least a few days to approve any agreement that President Joe Biden strikes with Speaker Kevin McCarthy, the real deadline could be even sooner.

    But McConnell, who has spent nearly half of his 81 years on Earth in the Senate, has seen more than a few difficult negotiations. Despite all the histrionics—the censorious sound bites, the “red lines” each side has drawn, the breakdowns and “pauses”—the talks thus far haven’t looked all that different from past Washington deadline dances, which tend to end with a deal. “This is not that unusual,” McConnell said.

    Read: Why Biden caved

    The public feuding is actually a good sign, and so, in a way, is the delay. “They need this to run to the very last minute,” Brendan Buck, a former aide to Speakers John Boehner and Paul Ryan, told me. As Buck sees it, the theatrics between GOP and Democratic leaders is a necessary precursor to a deal, because it shows partisans on their respective sides that they fought as hard as they could before reaching a compromise.

    Biden and McCarthy are trying to find a solution that can pass both a Republican-controlled House and a Democratic-controlled Senate. A quick-and-tidy agreement is likely to be viewed suspiciously by both parties, and particularly the GOP’s hard-right faction, which made McCarthy sweat out 15 votes to become speaker. “There’s no way McCarthy could have walked in two weeks ago, had a one-hour meeting with the president, and come out and said, ‘We have a deal,’” Matt Glassman, a former congressional aide who is now a senior fellow at Georgetown University’s Government Affairs Institute, told me. “That would be just deadly for him with his conference.”

    Today’s impasse has drawn comparisons to the debt-ceiling negotiations in 2011 between Boehner and then-President Barack Obama. Those talks featured even more drama, including the sudden collapse of a “grand bargain” and, later, a worried prime-time address to the nation from Obama. Even though the two parties have since drifted further apart (mostly thanks to the GOP’s move rightward), the gap between them in these negotiations is much smaller.

    Back then, Obama was pushing aggressively for tax increases, while Boehner wanted several trillion dollars in spending cuts, including major changes to entitlement programs. Biden initially took a harder line this time, refusing for months to engage McCarthy in negotiations over the debt ceiling. But since backing off that position, he’s made only half-hearted—and swiftly rejected—attempts to get McCarthy to raise taxes or make any kind of policy concession. To the frustration of progressives, he’s even seemed willing to tighten work requirements for people receiving federal safety-net benefits. Republicans, for their part, have agreed not to seek cuts to Medicare or Social Security. “I don’t actually think this is that difficult of a deal to reach,” Buck said. Getting that deal through the House and the Senate, he said, will be more difficult, which is why both Biden and McCarthy will need to save the biggest deadline pressure for the votes themselves.

    Conor Clarke: There is no constitutional end run around the debt ceiling

    By most accounts, the parties are haggling chiefly over whether to freeze government spending at current levels—Biden’s latest offer—or cut as much as $130 billion by reverting to 2022 spending, as Republicans have proposed. Republicans want to exempt the Defense Department from any cuts, which is a sticking point for Democrats.

    Considering the yawning philosophical differences between the parties, that’s not much of a gap. “Compromising over numbers isn’t that hard,” Glassman said. “It’s not like compromising over abortion.”

    Look closer and there are other reasons for optimism. Although some of McCarthy’s members are urging him to hold fast to the conservative provisions of the debt-ceiling bill Republicans narrowly passed last month, the speaker has moved off those demands. Even the blowups have been timed, either intentionally or coincidentally, to avoid spooking investors and causing stock markets to slide. The White House meetings between McCarthy and Biden, for example, have all occurred after the markets closed, and the biggest breakdown in the talks (so far) happened over the weekend before negotiations resumed on Monday.

    Republicans have many reasons for not causing a stock-market crash; the simplest is that they and many of their constituents would stand to lose a lot of money. Another possible reason is that party leaders, and McConnell especially, seem to recognize that a panic over the debt ceiling is not in their political interest and could undermine their negotiating position.

    McConnell is not a soothsayer—his prediction that Donald Trump’s grip on the GOP would loosen, for example, has not exactly panned out. Nor is his confidence that the country will avert default merely a forecast from a disinterested observer. If McConnell is saying it, he must think it benefits Republicans for him to do so.

    But even a self-interested assurance is one more indication of hope, a sign that Republicans want to prevent economic disaster. A debt-ceiling deal between Biden and McCarthy remains more likely than not. It might just take a few more days of posturing and setbacks before it happens.

    Russell Berman

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  • McCarthy: ‘Don’t Give Up’ On Debt Limit Talks, But Signs Of Progress Prove Elusive

    McCarthy: ‘Don’t Give Up’ On Debt Limit Talks, But Signs Of Progress Prove Elusive

    House Speaker Kevin McCarthy (R-Calif.) said the latest meeting with the White House over the need to raise the limit on how much the government can borrow was productive, even as he was pressed to point to specific signs of progress.

    “We’re getting closer. Don’t give up on us,” he admonished reporters at the U.S. Capitol early Monday night.

    McCarthy had his third face-to-face meeting with President Joe Biden in less than two weeks as the White House and congressional Republicans try to navigate a path to avoid defaulting on the government’s AAA-rated debt or leaving other bills unpaid because the Treasury Department runs out of borrowing room.

    Defaulting on the debt or other obligations would lead to an economic crisis, economists say, given the U.S.’s pristine creditworthiness and the role of the dollar in the global economy. Republicans want to force spending cuts and other policy changes in exchange for agreeing to lift the debt limit.

    But finding common ground has been difficult. The White House says its budget plan issued in March would cut the 10-year deficit by about $3 trillion through a combination of spending cuts and tax hikes. But there has been no vote on that budget plan.

    House Speaker Kevin McCarthy (R-Calif.) talks to reporters after meeting with President Joe Biden on Monday.

    House Republicans narrowly passed a debt limit bill that would cut the deficit on net by about $4.8 trillion over 11 years. But it would get to that number through stringent budget caps that would make annual spending bills for federal agencies very difficult to pass. Several Republicans said the bill was meant as an opening bid, not a final offer.

    The gap has been difficult to bridge and has only become more difficult as the clock ticks closer to early June, which is when Treasury Secretary Janet Yellen said the risk of default arises. Default could happen as early as June 1, she said again in a letter to lawmakers on Monday.

    McCarthy was asked why he was upbeat, especially after one of his lieutenants who attended the meeting, Rep. Patrick McHenry (R-N.C.), said he did not feel a sense of urgency from the White House. The speaker replied, “I don’t think we would agree to talks if we thought it wasn’t productive and that we couldn’t come to an agreement.”

    “We only talked about where our differences were. We talked about ideas. So we’re asking staff to get back and run through those ideas to see if we could come to an agreement.”

    In a terse three-sentence post-meeting statement, Biden also called the talks productive but acknowledged there were “areas of disagreement.”

    “We reiterated once again that default is off the table and the only way to move forward is in good faith toward a bipartisan agreement,” he said.

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  • Biden: GOP Must Move Off ‘Extreme Positions’ On Debt Limit

    Biden: GOP Must Move Off ‘Extreme Positions’ On Debt Limit

    HIROSHIMA, Japan (AP) — President Joe Biden said Sunday that Republicans in the U.S. House must move off their “extreme positions” on the now-stalled talks over raising America’s debt limit and that there would be no agreement to avert a catastrophic default only on their terms.

    In an effort to get negotiations back on track, Biden planned to call U.S. House Speaker Kevin McCarthy, R-Calif., from Air Force One on the way back to Washington after a Group of Seven summit in Japan. World leaders at the gathering expressed concern about the dire global ramifications if the United States were to be unable to meet its financial obligations.

    “It’s time for Republicans to accept that there is no bipartisan deal to be made solely, solely, on their partisan terms,” Biden said at a closing news conference before he departed. The president said he had done his part in attempting to raise the borrowing limit so the U.S. government can keep paying its bills, by agreeing to significant cuts in spending. “Now it’s time for the other side to move from their extreme position,” he said.

    Biden had been scheduled to travel from Hiroshima to Papua New Guinea and Australia, but cut short his trip in light of the strained negotiations with Capitol Hill.

    “My guess is he’s going to want to deal directly with me in making sure we’re all on the same page,” Biden said about McCarthy before their expected conversation. A compromise remained within reach, the president said, despite their differences.

    “I’m hoping that Speaker McCarthy is just waiting to negotiate with me when I get home,” he said. “I’m waiting to find out.”

    GOP lawmakers are holding tight to demands for sharp spending cuts, rejecting the alternatives proposed by the White House for reducing deficits.

    McCarthy tweeted on Saturday that it was the White House that was “moving backward in negotiations.” The speaker contended that Biden would “rather be the first president in history to default on the debt than to risk upsetting the radical socialists who are calling the shots for Democrats right now.”

    Republicans want work requirements on the Medicaid health care program, though the Biden administration has countered that millions of people could lose coverage. The GOP also introduced new cuts to food aid by restricting states’ ability to waive work requirements in places with high joblessness. That idea, when floated under President Donald Trump, was estimated to cause 700,000 people to lose their food benefits.

    GOP lawmakers are also seeking cuts in IRS money and asking the White House to accept parts of their proposed immigration overhaul.

    The White House has countered by keeping defense and nondefense spending flat next year, which would save $90 billion in the 2024 budget year and $1 trillion over 10 years.

    “I think that we can reach an agreement,” Biden said, though he added this about Republicans: “I can’t guarantee that they wouldn’t force a default by doing something outrageous.”

    Republicans had also rejected White House proposals to raise revenues in order to further lower deficits. Among the proposals the GOP objects to are policies that would enable Medicare to pay less for prescription drugs and the closing of a dozen tax loopholes. Republicans have refused to roll back the Trump-era tax breaks on corporations and wealthy households as Biden’s own budget has proposed.

    Biden, nonetheless, insisted that “revenue is not off the table.”

    For months, Biden had refused to engage in talks over the debt limit, contending that Republicans in Congress were trying to use the borrowing limit vote as leverage to extract administration concessions on other policy priorities.

    But with the U.S. Treasury Department saying that it could run out of cash as soon as June 1 and Republicans putting their own legislation on the table, the White House launched talks on a budget deal that could accompany an increase in the debt limit.

    The decision to set up a call with McCarthy came after another start-stop day with no outward signs of progress. Food was brought to the negotiating room at the Capitol on Saturday morning, only to be carted away hours later. Talks, though, could resume later Sunday after the Biden-McCarthy conversation.

    Biden tried to assure leaders attending the meeting of the world’s most powerful democracies that the United States would not default. U.S. officials said leaders were concerned, but largely confident that Biden and American lawmakers would resolve the crisis.

    The president, though, said he was ruling out the possibility of taking action on his own to avoid a default. Any such steps, including suggestions to invoke the 14th Amendment as a solution, would become tied up in the courts.

    “That’s a question that I think is unresolved,” Biden said, adding he hopes to try to get the judiciary to weigh in on the notion for the future.

    Associated Press writer Colleen Long in Washington contributed to this report.

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  • Democrats Fret As Joe Biden Negotiates With GOP On Debt Limit

    Democrats Fret As Joe Biden Negotiates With GOP On Debt Limit

    WASHINGTON ― Congressional Democrats are watching anxiously from the sidelines as President Joe Biden negotiates with House Republicans on a budget deal that would avoid a harmful default on the nation’s debt early next month.

    Biden has expressed openness to the idea of paring back some federal safety net programs, and his allies have acknowledged they will need to make concessions in order to reach an agreement by June 1, the projected date the U.S. is expected to no longer be able to meet its obligations.

    The fact that Biden is even in the position of having to negotiate with Republicans over the debt ceiling, something they lifted three times under former President Donald Trump without any fuss, has left progressive lawmakers fuming.

    “If Democrats cave to the GOP on work requirements, 1.7 million poor people could lose their healthcare and 275,000 could go hungry. That’s what is at stake. We must stand firm,” tweeted Rep. Ro Khanna (D-Calif.) on Thursday, referring to a key GOP demand to add stricter “work requirements” to federal programs that help low-income Americans afford food and health care.

    In further sign of angst on the left, 11 Senate Democrats sent a letter to Biden on Thursday urging him to prepare to raise the debt ceiling unilaterally by invoking the 14th Amendment of the U.S. Constitution, which states that the public debt “shall not be questioned.” The theory behind their argument is untested and would likely be challenged in the courts, however.

    “Republicans’ unwillingness to consider one penny in new revenue from the wealthy and large corporations, along with their diminishment of the disastrous consequences of default have made it seemingly impossible to enact a bipartisan budget deal at this time,” the senators wrote in the letter, questioning House Speaker Kevin McCarthy’s (R-Calif.) ability to pass a deal should one emerge in the coming days.

    But there’s rising discontent on the right about the direction of the talks, as well.

    On Thursday, the House Freedom Caucus, a group of dozens of hardline conservatives, called for an end to negotiations and for the Senate to simply approve the House GOP’s bill that raised the debt ceiling and sharply slashing spending over the next decade. Their stance implied that they won’t support any bipartisan agreement.

    “No more discussion on watering it down. Period,” the group warned in a statement.

    “The last thing we need is a repeat of the 2013 deal. It was a terrible deal for the country. I hope we’ve learned from our mistakes.”

    – Sen. Michael Bennet (D-Colo.)

    It’s possible that the urgent warnings from the left and the right this week are a sign that negotiations between Biden and McCarthy are making progress, and that perhaps a deal is close to materializing. Still, neither side is likely to support an agreement, and their votes may not be ultimately needed to pass one.

    Senate Majority Leader Chuck Schumer (D-N.Y.) has insisted for months that Republicans agree to a “clean” debt ceiling increase that would take default off the table with no strings attached, before negotiating over the budget later this year. On Thursday, however, he said that the only path forward is a bipartisan agreement.

    “No one will get everything they want,” Schumer cautioned.

    Democrats haven’t always loved Biden’s deals with Republicans, despite his successful track record as president. During a 2019 presidential primary debate, for example, Biden was criticized by Sen. Michael Bennet (D-Colo.) for making a “terrible deal” with Sen. Mitch McConnell (R-Ky.) that staved off a debt default in 2012. As vice president, BIden helped negotiate an agreement that made the bulk of George W. Bush’s tax cuts permanent.

    “I don’t know. I hope not,” Bennet told HuffPost on Thursday when asked if he worried about Biden agreeing to a similar deal this time around.

    “The last thing we need is a repeat of the 2013 deal. It was a terrible deal for the country. I hope we’ve learned from our mistakes,” he added.

    McCarthy claimed one early victory over Democrats this week, bragging that he had gotten them to back off against their stance of not negotiating over the debt limit.

    “The president and Leader Schumer have finally backed off their idea that they won’t negotiate,” McCarthy declared at a press conference on Wednesday. “They finally backed off the insane, un-rational, un-sensible idea that you just raise the debt ceiling.”

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  • Why Biden Caved

    Why Biden Caved

    The White House and Congress have not made much progress in their talks to avert an unprecedented, and potentially calamitous, national default that could occur as soon as early June. But on the most fundamental point of dispute, President Joe Biden has already caved: He’s negotiating with Republicans over the debt ceiling.

    For months, the president’s ironclad position has been that the debt ceiling is not a bargaining chip. No longer would Democrats allow Republicans to hold hostage the nation’s creditworthiness and economic prestige. Paying the government’s bills by raising the U.S.’s statutory borrowing limit would be nonnegotiable. As recently as Friday, White House Press Secretary Karine Jean-Pierre declared without equivocation, “We are not going to negotiate over the debt limit.”

    But Biden himself has dropped the pretense that his weeks-long budget discussions with the GOP have not revolved around the debt ceiling. Asked specifically about the debt ceiling on Sunday—in anticipation of a second White House visit by congressional leaders, planned for today—Biden told reporters, “Well, I’ve learned a long time ago, and you know as well as I do: It never is good to characterize a negotiation in the middle of a negotiation.”

    Read: This debt crisis is not like 2011’s. It’s worse.

    So there you go: It’s a negotiation. Exactly what the two parties are discussing is only starting to become clear. According to various reports, a deal to avert default could include some changes to permitting rules that would speed up domestic-energy production; a revocation of unused COVID funds; additional work requirements for some federal programs (although the president has ruled out any modifications to Medicaid); and, most significant, a cap on overall federal spending.

    The Biden administration still claims to be haggling only over the budget, not the debt ceiling. “The president has been emphasizing for months that he’s eager to have budget negotiations,” a White House official, who requested anonymity to explain the administration’s somewhat tortured position, told me. “That’s of course different from avoiding default, which is nonnegotiable.”

    Biden’s no-negotiation stance was born of past experience, when in 2011 Republicans dragged out debt talks with the Obama administration to the brink of default, resulting in a downgrade of the U.S.’s credit rating. But Biden’s approach this time is proving to be neither realistic nor sustainable, especially after Speaker Kevin McCarthy defied expectations last month by getting a budget-slashing debt-ceiling bill through his narrow House majority.

    Crucially, Biden failed to win strong support for his strategy from House centrists. Democrats had been hoping to persuade Republicans representing swing districts to buck McCarthy and help pass a debt-ceiling increase. But those lawmakers have stuck by the speaker. Complaining about a lack of outreach from the White House, they instead criticized Biden over his refusal—until recently—to negotiate. With Republicans unwilling to budge, Democratic centrists began to lose patience with Biden’s approach and conducted their own bipartisan negotiations.

    “We believe it’s very important in general that both sides sit down and try to work this out,” Representative Josh Gottheimer of New Jersey, the Democratic co-chair of the bipartisan Problem Solvers Caucus, told me before Biden’s first meeting last week with McCarthy and other top congressional leaders. “This can’t become a part of a political back-and-forth as the country drives off the cliff.”

    Read: “We used to be called moderate. We are not moderate.”

    Last month the Problem Solvers offered their own plan, which they presented as a fallback option that could win bipartisan support should Biden and McCarthy fail to strike a deal in time. The proposal would immediately suspend the borrowing limit through the end of the year to buy time for broader budget talks. If Congress agrees to unspecified budget limits and creates a fiscal commission to tackle the nation’s long-term deficits and debt, the plan stipulates that the debt ceiling would be increased through the 2024 elections.

    The compromise has yet to gain momentum, but its release seemed to undermine the Biden administration’s insistence that Democrats would not tie a debt-ceiling increase to spending reforms. “We didn’t try to fill in every blank, but we thought this was a really good framework to become the meat of the deal,” Representative Scott Peters of California, a Democrat who helped write the Problem Solvers plan, told me.

    It could still prove handy. Biden struck an optimistic note on Sunday, telling reporters, “I really think there’s a desire on [Republicans’] part, as well as ours, to reach an agreement, and I think we’ll be able to do it.” But McCarthy is sounding more dour. “I still think we’re far apart,” he told NBC News yesterday morning. The speaker said that Biden “hasn’t taken it serious” and warned that an agreement needed to happen by this weekend in order for the House and Senate to have time to debate and pass it by early June.

    Whether a Biden-McCarthy deal could even get through the House is also in question. Democrats have largely stayed quiet on Biden’s evident capitulation to Republicans, and the talks initially did not stir a backlash. But that may be changing as the president openly considers concessions that would be anathema to progressives, such as the possibility of adding work requirements to social safety-net programs. Still, the lack of a credible primary challenge to Biden’s reelection has helped give him room to negotiate, as Democrats fret about the effect that a default could have on the president’s already tenuous public standing.

    “As long as he continues to try to avoid default, and avoid the middle class having to pay the cost for it, then he’s in the position that the majority of the electorate wants him to be,” Jesse Ferguson, a longtime Democratic strategist, told me.

    McCarthy has much more to worry about. He traded away his own job security to win the speakership in January, agreeing to rule changes that would make it easier for hard-right conservatives to depose him. A debt-ceiling deal that fails to secure deep enough spending cuts or policy concessions from Democrats could threaten his position. “Default can be avoided. The question is whether Kevin McCarthy could withstand putting that bill on the floor,” Ferguson said.

    The speaker has secured no substantive commitments from Biden, nothing specific that he can sell to his party. But McCarthy has elicited one major concession from the president, which serves as a prerequisite for any others to come. Biden has come to the table with default in the balance, and he’s negotiating on the GOP’s terms.

    Russell Berman

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  • Biden, Yellen warn of ‘catastrophe’ if debt limit not raised | Long Island Business News

    Biden, Yellen warn of ‘catastrophe’ if debt limit not raised | Long Island Business News

    President Joe Biden and Treasury Secretary Janet Yellen warned Tuesday of a potential economic crisis if a deal isn’t reached to increase the federal debt ceiling.

    They raised the alarm during speeches to the National Association of Counties, which was holding a conference in Washington.

    Biden said many local governments have recovered from the pandemic, but “some in Congress are putting that progress at risk by threatening to have America default on its debt, which would be catastrophic for counties and the country. Even coming close to default would raise borrowing costs, making it harder to finance key projects in your communities.”

    The concern over the debt ceiling is the result of a political showdown between House Republicans, who are demanding spending cuts, and the Democratic president, who insists on raising the limit without conditions.

    Yellen similarly warned of a “catastrophe” in her own speech.

    “In the longer term, a default would raise the cost of borrowing into perpetuity. Future investments, including public investments, would become substantially more costly,” she said.

    “Household payments on mortgages, auto loans, and credit cards would rise, and American businesses would see credit markets deteriorate,” she said. “On top of that, it is unlikely that the federal government would be able to issue payments to millions of Americans, including our military families and seniors who rely on Social Security.”

    Yellen notified Congress last month that the U.S. Treasury Department has resorted to “extraordinary measures” to avoid default on the nation’s $31.4 trillion borrowing authority. But the extraordinary measures would likely run out — and put the U.S. at risk of default — sometime around early June.

    In a Jan. 13 letter to House and Senate leaders, Yellen said her actions will buy time until Congress can pass legislation that will either raise or suspend the limit, but she said it’s “critical that Congress act in a timely manner.”

    Biden and Republican House Speaker Kevin McCarthy met at the White House this month to discuss the issue. McCarthy told the president he would not raise the debt ceiling without concessions from Democrats.

    “No agreement, no promises except we will continue this conversation,” McCarthy told reporters outside the White House after the meeting.

    During his State of the Union address last week, Biden chided Republicans over the debt ceiling — suggesting that Republicans want to slash Medicare and Social Security.

    Yellen’s comments come ahead of the Congressional Budget Office’s projections to be released Wednesday, which updates the office’s expectation about when Treasury will no longer be able to pay its obligations fully if the debt limit is not raised.

    “Let’s not wait until the last minute,” Yellen said. ”I believe it is a basic responsibility of our nation’s leaders to get this done.”

    The Associated Press

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  • Kevin McCarthy Says U.S. Will Not Default In Debt Ceiling Fight

    Kevin McCarthy Says U.S. Will Not Default In Debt Ceiling Fight

    House Speaker Kevin McCarthy (R-Calif.) sought to reassure investors Monday that the U.S. government will not see a first-ever default on its debt as a result of the looming showdown later this year over the Treasury Department’s borrowing limit.

    In livestreamed remarks from the hallway just outside his office, McCarthy said: “Defaulting on our debt is not an option. But neither is a future of higher taxes, higher interest rates and an economy that doesn’t work for working Americans.”

    Though touted as “an address,” the remarks, taking roughly 10 minutes, broke little new ground in the standoff. The White House has said it will not negotiate over the limit; Republicans say they want unspecified budget changes in return for lifting the debt ceiling, with an implied threat of default if they are not placated.

    In a response to McCarthy’s remarks sent to reporters only minutes before they were delivered, White House spokesperson Andrew Bates said Republicans want to throw the economy into a tailspin through a debt default.

    “Tomorrow, President Biden will show the American people his plan to build on the unprecedented deficit reduction his leadership has already delivered by having the richest taxpayers and big corporations pay their fair share and lowering prescription drug prices,” Bates said of Biden’s State of the Union address Tuesday night.

    In his talk, McCarthy repeated several points Republicans have made before as they seek to paint the White House as unreasonable in wanting no strings attached to a debt limit boost. He said that Social Security and Medicare are “off the table” and that Republicans would “preserve our ability to defend this nation against threats abroad,” which could be seen as a pledge of no defense spending cuts.

    “Defaulting on our debt is not an option. But neither is a future of higher taxes, higher interest rates and an economy that doesn’t work for working Americans.”

    – House Speaker Kevin McCarthy (R-Calif.)

    The government bumped up against the $31.38 trillion limit in January, forcing the Treasury Department to dip into its bag of accounting of maneuvers to keep from breaching it.

    While those “extraordinary measures” will give the Treasury some time to keep borrowing, it’s unclear exactly how much extra time it will have. Treasury Secretary Janet Yellen has told lawmakers she did not expect to breach the debt ceiling until at least early June but offered no more specific timeline.

    A fight over the debt limit in 2011 between the Barack Obama White House and a Republican House brought the Treasury Department to within days of its claimed date on which it could no longer legally borrow or pay all the bills due. Though a deal was ultimately reached, the episode saw credit ratings agency Standard & Poor’s downgrade the creditworthiness of U.S. debt for the first time ever.

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  • Big Business Sounds Alarms Over GOP Debt Limit Hostage Plan

    Big Business Sounds Alarms Over GOP Debt Limit Hostage Plan

    It’s not just Democrats who are wary of House Republicans potentially holding the U.S. economy hostage next year with another debt limit showdown. Wall Street and corporate America are concerned, too.

    Recently, prominent business types have urged lawmakers to deal with the issue during the current post-election “lame duck” session, even if that means via legislation that could be passed with only Democratic votes.

    With that avenue all but impossible this close to Congress wrapping up, Democrats next year may regret having prioritized other items in the lame duck’s waning days.

    Republicans in both chambers of Congress have been eyeing possible demands for raising the debt ceiling and not letting the United States government default for the first time ever. Were that to happen, the dollar could lose its status as the world’s reserve currency, a role that lowers American interest rates and makes U.S. debt sought after in times of crisis, like the financial collapse of 2008.

    Sen. John Thune (R-S.D.) told The Washington Post that he and other Republicans would like to see changes in big-ticket programs like Social Security or Medicare in return for approving a debt limit hike.

    “Can the debt limit present that opportunity? I think it can, but we’ll see,” he said.

    Prominent corporate leaders are not comfortable with this emerging game of chicken.

    Jamie Dimon, the CEO of JPMorgan Chase, said on CBS’ “Face the Nation” Sunday that the effects of a first-ever debt default because of the debt limit impasse would be “potentially catastrophic.”

    “I would never take that risk,” he said. “For me, yes, I would get it done now. Take it off the table.”

    “For me, yes, I would get it done now. Take it off the table.”

    – JPMorgan Chase CEO Jamie Dimon

    Earlier this month, in an interview with CNBC, General Motors CEO Mary Barra called on lawmakers to address the debt ceiling in the lame duck, and to deal with immigration and tax breaks for business investment. “Going forward, we’d like to see the debt ceiling resolved,” among other priorities, Barra said.

    And Josh Bolten, a White House chief of staff in the George W. Bush administration and CEO of the Business Roundtable, a powerful business lobbying group, also called for dealing with the issue sooner rather than later.

    “Given the uncertainty facing the economy, we also urge Congress to address the debt ceiling as soon as possible,” Bolten said in a statement accompanying the group’s most recent quarterly survey of business leaders.

    It’s unclear when the debt limit will need to be raised, but it will probably be before next autumn. There was some momentum, after the Democrats’ better-than-expected showing in the midterms, to try to raise the debt limit or potentially address it with only Democratic votes by using the congressional budget process.

    But that faded as attention turned to avoiding a government funding lapse and subsequent shutdown, compounded by apparent skittishness among Senate Democrats. And Senate Minority Leader Mitch McConnell’s declaration that he expects the Senate won’t stay in session past Dec. 22 means there won’t be enough time to try the Democrats-only approach.

    So now the party is setting up a fight in 2023, when it won’t be able to use the budget process to pass an increase on a party-line basis because the House will be in GOP hands.

    House Budget Chairman John Yarmuth (D-Ky.) warned on MSNBC that Democrats will ultimately regret not taking action now.

    “I think if we don’t, it’s like handing the Republicans a legislative nuclear weapon,” he said. “They’ve already made it clear what they’re going to do. They’re going to use it to extort cuts in programs.”

    “I think if we don’t, it’s like handing the Republicans a legislative nuclear weapon.”

    – Outgoing House Budget Chairman John Yarmuth (D-Ky.)

    Yarmuth said the limit has been raised 78 times since 1960, evidence that it has had no effect on limiting the growth of government debt, as Republicans claim.

    If Democrats believe that having the business world on their side will help convince Republicans not to take their gambit too far in 2023, they may be mistaken. The last big standoff in 2011 brought the U.S. Treasury within a handful of days of default, and the House Republican conference now is different from what it was then.

    “Instinctually pugilistic, prone to brinkmanship, and harder to corral” was how Liam Donovan, a principal with the lobbying firm Bracewell LLP, described the incoming class of House Republicans. “And with [former President Donald] Trump himself using the debt limit as a favorite sign of establishment fecklessness, this dynamic will only be magnified.”

    The Republicans’ narrow five-seat margin over Democrats in the House means party leaders will be under intense scrutiny when the issue comes to a head, as “one false step” could lead to their ouster, Donovan said.

    “But the real risk is that too often, Wall Street thinks this is all Capitol Hill kayfabe, and doesn’t react to the sort of legislative chicken that really should make them nervous,” he said.

    In turn, Donovan said, this gives lawmakers a false sense of security, even as potential default draws nearer. “Absent some acute pain being felt in the markets or a selfless act from leadership, I don’t know how you’ll see the next showdown resolve.”

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