Republican House Speaker Kevin McCarthy vowed Monday to pass legislation to lift the US debt ceiling — but only with federal spending caps, a condition President Joe Biden has dismissed as a fiscal crisis looms.
The United States hit its $31.4 trillion borrowing limit in January, prompting the Treasury to take “extraordinary measures” that allow it to continue financing the government’s activities.
But if the debt ceiling is not raised or suspended by Congress before current measures are exhausted, the US government risks defaulting on payment obligations as early as July, with profound implications for the economy.
In a speech at the New York Stock Exchange, McCarthy slammed the Democratic president for “reckless” spending and called for Biden to accept a “reasonable negotiation” to hash out a fiscal compromise addressing rising debt without risking a default.
He vowed Monday that the US House would not approve a “no-strings attached” debt limit increase, adopting a hard line against the president.
McCarthy added that the House would pass a bill in the coming weeks to raise the debt ceiling — but with spending cuts included.
He did not provide specifics but said the plan would not involve reductions in Social Security or Medicare, two politically popular entitlement programs.
The speaker’s remarks are designed to pressure Biden into accepting a Republican fiscal agenda.
However, the administration has demanded that congressional Republicans not tie budget talks to the usual rubber-stamp process of raising of the debt ceiling.
– ‘Economic hostage-taking’ –
Biden has said repeatedly that he is ready to discuss spending reductions but that Congress must first pass a “clean” — no-strings-attached — debt ceiling increase before the current budget runs out of money.
On Monday, the White House accused McCarthy of taking the economy hostage by attaching conditions to any extension of the country’s borrowing limit.
“Speaker McCarthy is breaking with the bipartisan norm… by engaging in dangerous economic hostage-taking that threatens hard-working Americans’ jobs and retirement savings,” said White House spokesman Andrew Bates.
McCarthy, a close ally of former president Donald Trump, said Biden’s policies added trillions of dollars of debt to America’s fiscal portfolio — a move he argued had also caused the inflation crisis.
“Addressing the debt requires us to come together, find common ground and reduce spending,” McCarthy said.
“Let me be clear: defaulting on our debt is not an option. But neither is a future of higher taxes, higher interest rates, more dependency on China and an economy that doesn’t work for working Americans,” he added.
Appearing keen to focus any potential blame on Democrats should negotiations fail, McCarthy said he feared Biden would be the first US president to “bumble into a default.”
Ahead of McCarthy’s speech, the White House also pointed to comments from former presidents Ronald Reagan and Trump, noting the importance of reliable US debt payments to the country’s international standing.
“Speaker McCarthy is holding the full faith and credit of the United States hostage,” said Bates added in a statement sent early Monday.
The statement added that extreme Republicans’ wish lists “will impose devastating cuts on hardworking families, send manufacturing overseas, take health care and food assistance away from millions of people, and increase energy costs —- all while adding trillions to the debt with tax cuts skewed to the super-wealthy and corporations.”
But McCarthy alluded to Biden’s record of fiscal moderation in the Senate and as vice president, arguing he has strayed in embracing more robust social spending as president.
Biden has signed into law a $1 trillion infrastructure package and pumped billions more into domestic semiconductor manufacturing and green energy investments.
As the Republican House leader before the midterm elections made him speaker, McCarthy opposed all of these laws.