The Collapse of the Fed: McCarthy’s Debt Conundrum in the White House and in the Wall Street Lobby: A Reply to Biden
McCarthy is in a bind. The president has no power to raise the government’s borrowing limit. Yet the speaker is demanding Biden give away his store over a duty that only McCarthy and his lawmakers can fulfill. Nobody would benefit from a default as a president is likely heading into a reelection race. But it’s hard to see how McCarthy can emerge from this conundrum as the winner if he triggers an economic meltdown.
The California Republican traveled to Wall Street on Monday to deliver a fresh warning that the House GOP majority will refuse to lift a cap on government borrowing unless Biden agrees to spending cuts that would effectively neutralize his domestic agenda and neuter his White House legacy.
McCarthy told traders that he wouldn’t allow the US government to default on its obligations, which would cause disaster, cause a recession, and lead to job cuts by fall if the debt ceiling is not raised.
This is where Americans are at risk. It will be very difficult to engineer either of these outcomes, because the conference contains plenty of extremists.
The American Debt Ceiling is a Time Bomb: How Do We Obtain What You Want, and How Will We Defend It?
The U.S. hit its current debt limit — $31 trillion — in January. A band-aid is what the Treasury Department is resorting to with extraordinary measures. Those measures are set to run out in early summer. Should Congress fail to raise the debt limit by then, there would be an unprecedented debt default, something that would throw worldwide financial markets into dire straits and likely lead to a recession.
“I think we got 218 to raise the debt ceiling,” McCarthy told CNN. There is a lot of agreement within the conference. We will get together and work through it.
His assurances may not be very reassuring, however, because his similarly blithe predictions that he had the votes to win the speakership in January degenerated into a farcical process that saw him make huge concessions to his party’s most radical members and required 15 ballots before he finally won the job of his dreams.
McCarthy’s immediate political ambition will not be affected by the debt ceiling because it will be Americans’ livelihoods and the global economy.
So far, Republicans seem to be having trouble negotiating with themselves, let alone Biden. The initial bill the party hopes to pass next week is being challenged, according to a Republican congressman from South Dakota.
Johnson said the hardest part was that there were so many conservative policy victories that we wanted to see worked in. In a negotiation, you are never going to get everything you want. And so I think our biggest issue right now is how do we squeeze these thousands of desires down to a manageable and credible number of asks?”
Republicans raised the debt limit when Donald Trump was the president since he was not worried about spending a lot. The 45th president was in the White House when he said he couldn’t believe anyone would use the debt ceiling as a negotiating wedge. Republicans notoriously turn into fiscal hawks when Democrats are in office but often look the other way when there is one of their own in the Oval Office.
Is it the right hill for Republicans to fight this battle when millions of jobs are at risk? The absolutist nature of McCarthy’s position pays little heed to a delicate balance of power. Voters might have been interested in compromise rather than confrontation because Democrats control both the Senate and the White House.
“Without exaggeration American debt is a ticking time bomb that will detonate unless we take serious responsible action. How has President Biden responded to this issue? He has done nothing. He said that it was irresponsible for the rest of America.
Fiscal battles between GOP-controlled Congresses and Democratic presidents have usually rebounded poorly on the Republicans. Presidents Bill Clinton and Barack Obama, for example, branded their foes in the House as economic arsonists and thereby gained political traction.
Republicans have addressed the debt limit several times in the past, without resorting to hostage taking or brinksmanship, as Presidents Trump and Reagan did in office.
Reply to the Budget Crisis: Speaker Biden and the Senate Republicans (Reply to CorCornell, McConnell and Resolving the House Budget Crisis)
The Senate has been trying to avoid the mess so far. The Senate Republican leader gave his colleague in the House some moral support when he returned to the Capitol after a fall.
“President Biden does not get to stick his fingers in his ears and refuse to listen, talk or negotiate. The American people know that. The White House needs to stop wasting time and start negotiating with the Speaker of the House,” McConnell said, though notably didn’t volunteer to get involved.
McCarthy delivered a speech that made it very clear that there is a damaging political crisis over the debt ceiling. The political crisis surrounding the debt ceiling has been simmering for months.
If Speaker McCarthy continues in this direction, we will be headed to default because he did not give us any more details, facts or information when he went to Wall Street.
The proposal, entitled the “Limit, Save, Grow Act of 2023,” would raise the debt limit by $1.5 trillion or through March 31 of 2024 — whichever comes first —return discretionary spending to 2022 levels, and limit the growth of spending to 1% annually.
McCarthy said on the floor that limited government spending would reduce inflation in Washington. “If Washington wants to spend more, they have to find savings elsewhere, just like every single household in America.”
McCarthy said the plan would repeal key parts of Democrats’ signature legislative package, as well as President Biden’s program to scrap college student debt, which is currently tied up in courts.
Democrats approved an IRA last year to ease up on the agency’s backlog in order to improve the IRS. House Republicans voted to undo the legislation, even though it would not have passed in the Senate. The nonpartisan Congressional Budget Office has estimated the allocated $80 billion over 10 years for the IRS would increase revenues, and that repealing the measure would actually contribute to the deficit.
He noted Medicare and Social Security — two programs that have broad public support but are also major drivers of spending — would not be impacted by the cuts.
Adults without dependents can earn a paycheck and learn new skills under the plan. “By restoring these commonsense measures, we can help more Americans earn a paycheck, learn new skills, reduce childhood poverty and rebuild the workforce.”
A Democratic blasted attack on the president’s proposal for work requirements in debt ceiling negotiations: David Scott, a U.S. agriculture ranking member
Democrats remain critical of any efforts to link debt ceiling negotiations to legislation that would require work requirements for those on assistance programs.
“Let me be perfectly clear: Holding food assistance hostage for those who depend on it — including 15.3 million of our children, 5.8 million of our seniors and 1.2 million of our veterans — in exchange for increasing the debt limit is a nonstarter,” David Scott, D-G.A., House Agriculture Committee ranking member, said of McCarthy’s proposal for work requirements.
Speaker McCarthy and his extreme Republican colleagues are ensuring their failure by including these radical proposals as a lever in debt limit negotiations.
In his speech, McCarthy blasted the president for not meeting with him to negotiate. The pair last met in February and remain at odds over how to address the debt limit.