On Monday, Republican U.S. House Speaker Kevin McCarthy will argue for federal spending cuts to accompany lifting the $31.4 trillion debt ceiling at the New York Stock Exchange.
His statement comes as the federal government nears its financial collapse this summer. A historic default will rock the U.S. and global markets if the divided Congress does nothing.
The White House wants Congress to lift the borrowing limit without conditions, as it did three times under Biden’s Republican predecessor, Donald Trump. Senate Democrats, who control the limit, have been at odds with Republicans for months.
This week, the Republicans who control the House of Representatives will try to unite around a proposal to increase the ceiling to May 2024, when the next presidential election campaign begins, in exchange for severe expenditure cutbacks. However, the Democratic support needed to implement such a scheme seems uncertain.
McCarthy heads a divided caucus with a 222-213 majority, including many hardliners who seek deep budget cuts and reject the debt ceiling threats. Biden believes House Republicans should present a budget to begin spending negotiations.
I’m confused. “I don’t know what they want,” Biden told reporters Saturday.
Last month, the White House proposed a budget to lower the deficit by about $3 trillion over ten years by raising taxes on businesses and the rich.
Last month, the impartial Congressional Budget Office presented many debt-reduction proposals, showing that tax increases would have a greater impact than spending cuts.
Republicans have discussed cutting homeland security, law enforcement, health, education, and environmental programs. However, freezing spending at 2022 levels or permitting yearly rises of 1% for a decade will not keep up with inflation or population growth, thereby cutting money.
The CBO projects that Social Security and Medicare will nearly quadruple in cost over the next decade, which Republicans blame for the deficit.
Investors will worry about the economy as Congress approaches the “X-date” when the federal government can no longer pay its bills. The 2011 debt ceiling dispute caused an unprecedented drop in the U.S. government’s credit rating, spooking markets and escalating borrowing prices.
House Republicans are considering debt ceiling measures, which have failed to reduce U.S. budget deficits.
Congress can temporarily suspend the debt limit, which is currently $31.4 trillion. Instead, House Republicans are considering linking the cap to GDP.
Washington centrist research group Bipartisan Policy Center economic policy director Shai Akabas said “such an approach would be quite challenging” to adopt.
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